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Apple's innovation engine has done it again. First, it forever changed the music industry. Next, it redefined the mobile phone business. Now, it's doing its number on personal computing.
Computer industry researchers are calculating the effects of mobile devices — what Steve Jobs refers to as post-PC-era products — on the PC market. They're concluding that changing consumer patterns, such as the proliferation of smartphones and the rising use of iPads and other tablet computers, are starting to bite into the traditional PC market.
"The post-PC era represents a change in consumer behavior. It's not just the device. It's the social behavior. It's a social trend," says Forrester analyst Sarah Rotman Epps. "The post-PC era represents a social shift and a technology shift."
What's at stake: the spoils of the PC industry and who gets to redefine the landscape. That is increasingly being driven by consumers' appetite for portability, battery longevity and a different computing experience. What's happening is that people are changing their habits as they add tablets to their menu of computing needs. That's because portable computing is no longer just a desk activity. It now goes to the living room, dining room and bedroom or easily travels in a purse to be shared with friends. It can be both entertainer or lightweight road warrior.
"Computing has become more ubiquitous, casual and intimate," Rotman Epps says.
In turn, consumer buying behaviors are changing: Gartner on March 3 revised downward its global PC forecast — which includes desktops, laptops and netbooks — citing the iPad effect. Gartner lowered its worldwide PC shipments forecast for 2011 to growth of 10.5% compared with previous predictions for 15.9%. The analyst firm now sees weaker consumer demand for the segment of the traditional market known as mobile PCs, which consists of laptops and netbooks. Netbooks are expected to be the hardest hit.
"Ignited by Apple's iPad, tablets to us represent a distinct new mobile computing category, significantly expanding the computing market," RBC analyst Mike Abramsky wrote.
Rick Friesen, 55, of Billings, Mont., travels for about 50% of his work schedule. After looking at netbooks, he recently concluded a tablet would take care of most of his needs. "An iPad looks like it will do 90% to 95% of what I do on the road," he says. But he also likes the lightweight portability of an electronic reader. "I was looking for a reader, too. So I kill two birds with one stone."
Tablet and smartphone shipments combined are now expected to trump PC shipments by 2012, according to another forecast. By 2014 such devices together will represent 64% of all computers, says the report from RBC Capital Markets.
That trend will likely continue to influence the buying decisions for tens of millions of consumers this year. Industry analysts expect that Apple will sell north of 5 million iPads during its second quarter. When was the last time a computing device had such star status?
"I would go for an iPad over a netbook but not a laptop," William Barnes of Sacramento recently said as he exited the Apple Store in downtown San Francisco.
That sentiment is exactly what's been tracked by Gartner's research.
"Mobile PC growth has slowed quite a bit, and it's certainly been the case with netbooks," says Gartner analyst George Shiffler. Even though netbooks are usually cheaper, the lower-cost mobile PCs and iPads are both pitched at the same market. "In some ways, the tablet has the advantage because it's more mobile," he says.
People are still buying larger, more powerful laptops. But consumers are less inclined to choose a netbook when the choice is between it and a tablet device.
Don't write the traditional PC's epitaph just yet. People still need them to perform more difficult computing tasks. "People talk about the PC market like it's broken. It's not," says analyst Richard Shim of industry tracker DisplaySearch. Gartner expects worldwide PC shipments next year of 440.6 million units, up 13.6% from 2011.
But tablets are here to stay, analysts say.
'Missed opportunity'
By 2017, roughly two tablet PCs will ship for every three notebook computers worldwide, according to industry tracker DisplaySearch.
Indeed, tablet forecasts underscore remarks from Apple chief Jobs, who recently said of the company, "We're in a position now where the majority of our revenues come from these post-PC products."
To be sure, Microsoft beat Apple to tablets with a foray into this "other category" computing device. Microsoft's early version of a tablet PC, announced in 2001, began with a stylus and a laptop whose screen could flip around to be activated by the stylus.
Later Windows tablet versions would emerge, but none had a wow factor to spur widespread consumer interest. "The tablet PC did not invent the modern tablet — it crashed and burned," Jobs said at the iPad 2 launch, in clear reference to Microsoft's futile tablet efforts.
The impact of Microsoft's missteps in adapting its mobile strategy to capture consumer interest was punctuated last year when Apple passed the software giant in value to become the No. 1 technology company based on market capitalization, a multiple of the number of shares outstanding and company share price.
Apple sold nearly 15 million iPads, generating $9.5 billion in revenue, last year.
"That's more than every tablet PC ever sold," Jobs said.
The company is on track to ship 43.7 million iPads for 2011 and 63.3 million in 2012, says industry tracker iSuppli. Tablets based on Google's Android operating system fromMotorola, Samsung, Hewlett-Packard and RIM are vying for a chunk of the lucrative market as well. Yet, early reports from technology researcher Forrester say Android-based tablets are poised to fail and lack consumer interest.
"Windows is consumers' No. 1 preferred operating system for tablets. And yet Microsoft's partners have failed to deliver a Windows experience on tablets that competes with the touch-first, always-on, instant-on experience of the iPad," says Rotman Epps.
Forrester and others believe Microsoft has the potential to offer a compelling slate. But it shouldn't depend on partners such as Asus or Hewlett-Packard to drive a sexy Windows tablet. "You have to use a lighter OS and a mobile processor," says DisplaySearch's Shim. "It requires a very big investment in starting over."
