According to research firm Gartner, global shipments of PCs came to 84.3 million in the first quarter. However, after six quarters of growth, that figure marked a 1.1% decline. (Keep in mind that Gartner was projecting 3% increase).
What happened? There are several reasons for the weakness, such as higher oil prices and the earthquake and tsunami in Japan. What’s more, PC owners are holding onto their machines longer.
Yet there is another factor that is likely to have a long-term impact on the PC market: the surge of tablets. Consider that last year Apple (Nasdaq:AAPL) sold a staggering 15 million iPads, with a market share of about 75%. At the same time, Google’s (Nasdaq:GOOG) Android operating system is getting traction in the tablet market.
Let’s face it, PCs are fairly boring and have few interesting applications. But tablets, they are convenient, fast and have dazzling graphics. Oh, and there is virtually no boot-up time.
As should be expected, PC companies are getting concerned — and so are their shareholders. For example, Gartner believes that Microsoft (Nasdaq:MSFT) won’t have any material share of the tablet market until 2015.
That sounds drastic, but the fact is that there is lots of fragmentation with tablets. Besides Apple’s iOS and Google’s Android platforms, there is also WebOS from Hewlett-Packard (NYSE:HPQ), QNX from Resarch In Motion (Nasdaq:RIMM) and MeeGo, which is backed by Intel (Nasdaq:INTC) and Nokia (Nasdaq:AAPL).
What’s more, building a good tablet is far from easy — especially since the iPad has a good price point. A solid tablet needs to have a sophisticated hardware platform that integrates seamlessly with the operating system. Of course, a tablet should have a thriving app ecosystem. Often, this means having an ever-growing number of gaming titles.
Take a look at RIM, which has just released its PlayBook. So far, the reviews have been terrible. All in all, it looks like the device was a rush job. If you want to get native email or a calendar, you actually need to have a BlackBerry. Otherwise, you will have to access this stuff from the browser. Crazy, huh? Something like this would have never leave the confines of Apple.
As a sign of the stress, the co-CEO of RIM, Mike Lazaridis, abruptly left a live interview for the BBC this week. He didn’t like the questions.
This is the kind of thing that should frighten investors. RIM has been losing ground in its highly lucrative smartphone business and its enterprise footprint is coming under pressure. At the same time, it looks like its tablet strategy is in shambles.
It’s never easy for large companies to transition to new technologies. There are risks of cannibalizing existing product lines as well as disrupting partnerships and alliances.
But there may also be some denial from the PC operators. Hey, Microsoft’s chief research and strategy officer, Craig Mundie, said the tablet could be a fad.
Funny enough, this is a typical response from an entrenched tech company. Just look at what the CEO of DEC, Ken Olsen, said back in 1977: “There is no reason for any individual to have a computer in his home.”
Tom Taulli’s latest book is “All About Short Selling” and his Twitter account is @ttaulli. He does not own a position in any of the stocks named here.
