Here’s the Big Picture Trend in the PC Industry
Apple (NASDAQ:AAPL) CEO Steve Jobs recently made a presentation entitled, “signs we’ve entered a post-PC era.” He’s certainly one of the best authorities on the trend, as his company is leading the way in making PCs less and less needed. With the release of smart phones, tablets, eReaders, and other digital widgets, companies like Apple, Google (NASDAQ:GOOG), and Amazon (NASDAQ:AMZN) are driving the PC quickly towards an early grave. Recent reports from technology information firm Gartner (NYSE:IT) suggest that PC shipments grew only 2% last quarter, (vs. expectations of over 6% growth) and may have reached a tipping point in their product life cycle, as customers continue to find cheaper and savvier ways to replace clunky desktops. “This is a time of intense change,” said Sarah Rotman Epps, a Forrester Research Analyst. “New competition for PC manufacturers makes it just really, really hard to make a profit.”
What does this mean for the established leaders in PC sales, companies like Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL) that spent years perfecting the tech, style, and branding to offer top selling lines of personal computers, or Intel (NASDAQ:INTC), the world’s largest chip-maker? They have two options, say analysts, with the first being focus on increasing share in PC sales in emerging markets, targeting demographics with a growing middle class such as India, China, Brazil, and other nations where consumers may be just finding the necessary level of disposable income to buy a PC. The second is to go with the flow, and focus less company time and resources on developing personal computer’s and related components, and redouble efforts on mobile devices such as tablets and smart phones.
Some companies such as Intel (NASDAQ:INTC) and Advanced Micro Devices (NYSE:AMD) are already beginning to follow the latter path, reorganizing internally to focus on making chips for mobile devices rather than PCs. Others, such as Cisco (NASDAQ:CSCO) and Hewlett-Packard (NYSE:HPQ) have branched into mobile as well, offering tablets and other mobile products to keep up with sales trends.
While the PC markets growth has certainly slowed in recent years, it is far from a dead industry. This year PC sales are expected to total 362 million (a $250 billion market), which still dwarfs sales of tablets, expected to grow to near 50 million sales this year ($35 billion market). However, growth in mobile devices is quickly ascending, with Goldman Sachs (NYSE:GS) analysts predicting another 21 million new tablet users this year, and as many as 100 million total in 2012. While the PC industry likely has rooted itself deeply into corporate and private infrastructures, the age of the “post PC era” as Jobs calls it, has certainly dawned, bringing with it a series of new challenges for tech leaders from the first computing revolution.