The Evolution of the PC “Device”

August 24th, 2011

With the help of iPad sales, Apple has now pushed past HP to claim the number one spot in mobile PC devices. What will HP do? - get out of PC device manufacturing.

Preliminary numbers show 10.7M iPads shipped in Q2′11, with a year-on-year growth rate of 107%, as reported by Displaysearch mobile PC report. These numbers, plus 2.8M iMac’s, gave Apple a total of 13.9M mobile PCs - a 3.9M unit edge over HP in the category. Total second quarter growth was 136% year-on-year.

Consider these facts from an August 19 DigiTimes article:

  • •Tablet PC shipments were up nearly 70% on quarter and over 400% on year with nearly 16.4M units shipped in Q2′11.
  • •Notebook shipments were down 2% on quarter, but up 2% on year with nearly 48M units shipped in the second quarter of 2011.
  • •Consumer notebook adoption is slowing and continues to hold back the industry following a 2% on-year drop in shipments in the first quarter of 2011.
  • •Worldwide mobile PC shipments (including notebooks and tablet PCs) reached 64.4M in the second quarter of 2011, up 10% on quarter and 28% on year.
  • •Among the top-five players, Acer experienced the largest decline in shipment growth in Q2′11 falling 4% on quarter and 12% on year.

The conclusion? - Notebook sales are stagnant, but the mobile PC category is growing nicely driven by tablet sales - no surprise here.

Some analysts predict up to 22M more Apple iPad units will sell this holiday season. In-Stat says that worldwide tablet shipments will approach 250M units by 2017. No wonder some analysts (Jason Schwartz-Seeking Alpha) are calling for the "end of the Laptop era."

Devices are evolutionary by nature. Laptops dominated for years because they offered mobile access to one’s digital data on a hard disc. But that value proposition has been under attack since Acer introduced the Eee netbook, demonstrating the power of the cloud to deliver similar functionality. Google took the idea one step further with the "Chromebook" concept that also de-emphasized the device, (and displaced the MS Windows platform) using the browser as the O/S.

And as Apple takes the lead with the tablet paradigm, HP reacted last week saying that after 10 years and a $25B investment (merging with Compaq in 2001) they are now looking to abandon the PC manufacturing business and move to a more IBM-like "enterprise approach" (digital services) to provide profits for share-holders. It’s a gutsy move but perhaps the best one for the company. It is willing to ignore sunk costs and focus on what they do best in order to remain relevant in a fast changing world.

We think what really may be going on here is just as Steve Jobs predicted at the Apple WWDC (World Wide Developers Conference) wanting to "…demote the PC and the Mac to just be a device" as the company works to, "…move the digital hub, the center of your digital life, into the cloud." It’s here that Apple, Google and others will continue to deliver more of its services going forward, and eventually most of its profits long-term. Remember, Apple already makes billions brokering Apps developed by ISDs (independent software developers) with much higher profit margins than hardware can ever hope to achieve. Google gives away its Android software to device makers, so it can deliver highly profitable click-through ads to the mobile space-and beyond.

What Apple and others have done, is identify early-on that it’s not just about the device-but the ecosystem that supports our new Web-enabled lifestyle. It just so happens that into this lifestyle, Apple is brilliant at introducing "must-have" products that are continually pushing the boundaries of what the technology can deliver. For now, this has propelled the company to the top of the mobile device heap. And they will stay there not by focusing on the device alone, but by continuing to support an ever-growing ecosystem that fosters innovation, and ultimately delivers what the customer wants. - Steve Sechrist

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