Is This a Game Changer for the PC Industry?

2011 was a good year for the tablet industry -- but not so for the PC industry. Consumers have had a taste for tablets, which meant fewer consumer dollars for PCs. While sales of notebooks have not been too bad, the industry knows that if it does not evolve with tablet-like features soon enough, their days may be numbered.

You're on fire, baby!
Tablets in 2011 were on fire with a monstrous 72.7 million units shipped last year alone. This accounts for nearly 26% of worldwide mobile PC shipments. The growth for tablet sales in 2011 compared to the year-ago period came in at a spectacular 256% because of the sheer hunger for the ultra-portable devices aided by additional channels of distribution. Shipments of conventional notebook PCs, however, grew by just 12% to 187.5 million units

That sinking feeling
The PC industry as a whole during the past year has been suffering a lot. According to Gartner, worldwide PC shipments for the third quarter of 2011 increased by just 3.2% from the same period in 2010 due to a number of factors:

  • Scarcity of hard drives: Hard disk makers Seagate (Nasdaq: STX  ) and Western Digital (NYSE: WDC  ) saw their manufacturing facilities hurt by flooding in Thailand. However, Seagate's factories remained intact, giving it an edge over Western Digital, which was not so lucky. Since the flooding, hard drive prices have soared by as much as 300% in the U.S. and Canada. And besides price increases, the two companies also cut down on warranty commitments for many of their hard drive models.
  • Poor economic environment: The ongoing European debt crisis coupled with high unemployment levels in the U.S. has spooked consumers out of shops, hitting PC sales among other things.
  • Competition from tablets: Perhaps the main reason for lower-than-normal PC sales is the avalanche of tablets that have commanded a huge slice of consumers' electronic cravings. Tablet devices have by far become the most intuitive and visually appealing alternatives to laptops and personal computers.

Not giving up without a fight
The PC industry is fighting back with its army of uber-cool thin, light, and swift notebook PCs called ultrabooks. But ultra-thin notebooks aren't new. Remember the MacBook Air? Well, Apple (Nasdaq: AAPL  ) first introduced the super-thin notebook back in January 2008, which was received with great enthusiasm. Apple later went on to make souped-up versions with faster processors and flash-based storage.

While Intel hopes its processors will be in heavy demand with this category of notebooks, Microsoft also hopes these devices would sport the latest version of Windows that is due to be released in the first half of this year. Microsoft knows PCs are beginning to lose out to tablet computers. Hence, the Windows 8 operating system would also cater to tablets and would support ARM processors.

The specter of things to come
Last year, HP (NYSE: HPQ  ) planned to dump its PC business thinking that it was the end of the world for the computer. However, the company pulled back on that thought. Recently, HP released a teaser video on the Internet showing off its latest ultrabook dubbed the Spectre. The device portrayed is very thin, though other features such as the keyboard and screen are not shown.

Dell has also followed suit with the ultrabook and said it would focus on making "thin and powerful" laptops that would rival tablets.

The road ahead
With tablets eating up the PC market, manufacturers are pinning their hopes on the ultrabook that would seek to maintain relevance and growth in the industry. However, it remains to be seen what ultra-thin notebooks would really do to the tablet market in 2012.

In my opinion, I don't think ultrabooks will be a game changer for PCs. They'll only increase its aesthetics.

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Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Intel, Western Digital, Microsoft, and Apple. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Microsoft, Intel, Apple, and Dell. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Intel. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 12, 2012, at 3:17 PM, deemery wrote:

    >2011 was a good year for the tablet industry

    Besides the iPad, what other tablet/tablet maker had "a good year?" Let's measure by both unit sales and by some measure of corporate profitability.

  • Report this Comment On January 12, 2012, at 4:13 PM, pittaro wrote:

    How many people have tablets, that don't have access to a PC (or Mac).

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