Growing Popularity of Tablets Hits PC Market

Growth in the PC market is forecast to decline from 9.3% to 3.8% this year as economies in Western Europe and the United States continue to weaken and as the growing tablet computer market detracts from traditional PC sales, according to research firm Gartner.

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While the success of Apple’s (NASDAQ:AAPL) iPad has put a dent in demand for personal computers, especially laptops, the debt crises in Europe and the U.S. and the associated fallout have caused business and consumer spending to tighten. “U.S. consumer PC shipments were much weaker than expected in the second quarter, and indications are that back-to-school PC sales are disappointing,” said Ranjit Atwal, a research director at Gartner.

Another research director at Gartner, George Shiffler, said, “Media tablets have changed the dynamic of the PC market and HP’s decision to rethink its PC strategy simply highlights the pressure that PC vendors are under to adapt or abandon the market.” Shiffler refers to Hewlett-Packard’s (NYSE:HPQ) decision last month end production of its TouchPad tablet, as well as exit the PC market as a whole. HP plans to either sell or spin-off its hardware business and focus solely on software.

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With the exception of Apple, most PC makers are stumbling. “Vendors’ tried and true business models are failing as traditional PC functionality is extended to other devices, and users continue to lengthen PC lifetimes. Vendors only seem to be failing as they look for quick fixes,” said Shiffler. Many traditional PC makers have tried to compete with Apple in the tablet market, but have produced inferior products that serve up little competition in terms of price.

Stocks to Watch: Dell (NASDAQ:DELL), Oracle (NASDAQ:ORCL), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), Lenovo (PINK:LNVGY), Samsung (SEO:005930), Acer (TPE:2353), Apple (NASDAQ:AAPL), Hewlett-Packard (NYSE:HPQ).