It's been a bad couple of weeks for the PC. First, Dell unceremoniously dumped the word computer from its name. Then, Gateway announced its innovative plan to climb out of the financial hole it fell in more than two years ago by becoming Best Buy, but with furniture and servers thrown in for good measure.

Dell's move makes business sense. There's solid evidence that the company has indeed become a "diverse supplier of technology products and services," including flat-panel displays, Axim PDAs, and printers. Gateway's game plan is less clear. While a "branded integrator" that helps home users tie together entertainment centers and home offices sounds somewhat appealing, the company has tried so many strategies, ad agencies, and executive shake-ups over the past few years that the whole thing smacks of a Hail Mary.

The desktop is no longer PC
The common thread in both the Dell and Gateway shifts, however, is the desire to diversify beyond the desktop. No one seemed too concerned about selling only computers when they were selling briskly, but now that things have cooled off, P and C have suddenly become scarlet letters. No wonder Bill Gates sounded a bit defensive at WinHEC this week, arguing that "there is no way anyone can say that the PC isn't the highest-performing platform for any application."

No one seemed too concerned about it when computers were selling briskly, but now that things have cooled off, P and C have suddenly become scarlet letters.

The lone bright spot for the industry lies in notebook PCs, but sales of notebooks seem to be growing at the expense of desktop sales and now make up nearly a quarter of the total market, according to IDC. Moreover, the entry of lean-and-mean eMachines with its M5305, a fully loaded thin-and-light (with a 15.4-inch wide-screen display, 512MB of memory, and a combo CR-RW/DVD drive) for about $1,200, should squeeze out whatever profit margins remain in the notebook market.

Many people think that what the PC industry needs is its own iMac or PowerBook. But I'm not convinced the problem is a lack of attention-grabbing designs. Let's face it: Apple couldn't generate better buzz if Steve Jobs landed his Gulfstream V on the deck of the USS Abraham Lincoln. (If only the Navy made flight suits in black and indigo.) While Gates drones on about security protocols and CE .Net, Jobs spends his time soaking up the sun with Sheryl Crow and Dr Dre. But for all the adulation Apple gets for its sleek hardware, simple software and services, and museumlike stores, its digital hub strategy has failed to boost the company's minuscule market share. (Gateway execs, take note.)

Dell goes directly to the bank
Meanwhile, Dell keeps cranking out desktops and notebooks that are a little faster and a little cheaper but otherwise pretty much identical to the ones before. Yet they just keep on rolling off the shelves, suggesting that design isn't the real issue. Furthermore, if style is what you're after, there are a few choices out there among Windows PCs. The new Sony VAIO Z1 series, for example, more than holds its own in the looks department.

	The Sony VAIO Z1 series: not short on style (Click to enlarge.)

Instead, the industry really needs a new killer app that will spur buyers to upgrade. That's what Microsoft is clearly after, wrangling the PC into everything from a TV (Media Center) to a flat panel (tablets and Smart Displays) to a phone (Athens PC). But so far, none of these concepts feels fully baked or even really big enough to help turn things around, and many rely on software and services that still have too many rough edges. Still, the current hotbed created by digital audio and video, wireless, and broadband is sure to give life to that next great idea sooner or later. Either that, or we'll all switch to Macs.