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The PC Market Takes Another Hit -- Does It Matter?

By Chris Neiger - Apr 12, 2013 at 8:30PM

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The latest numbers from the IDC show PC sales slumping, but it shouldn't come as a surprise. Mobile is taking over the tech world, and PC companies should focus on nothing less.

Okay ... the headline may sound a little harsh to some tech investors; but it's a question worth asking. Even investors who own stocks in companies that make PCs should be asking it. Why? Because tech companies that want to be around a decade from now should stop looking at their PC sales numbers and figure out how they're going to make money with mobile.

We know where we're going
Just a few days ago, the International Data Corporation released the latest figures showing that PC sales dropped almost 14% year over year in the first quarter of 2013. But we all knew this was coming. Steve Jobs foretold it two months after Apple (AAPL 4.08%) launched the iPad. "We like to talk about the post-PC era, but when it really starts to happen, it's uncomfortable," he said at the All Things Digital conference in 2010.

Some of the worst news from the IDC report came against Microsoft (MSFT 2.76%), with the IDC saying Windows 8 may be part of the PC industry's problem. Bob O'Donnell, IDC Program Vice President, Clients and Displays, said in a press release that, "At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market."

He went on to say that some PC buyers may be turned off from Microsoft's drastic changes to its Windows 8 OS because of a new user interface and increased costs for touch-capable computers. To pin all this on Microsoft seems a bit harsh, though, and it seems more likely that the demise of PC sales have come simply because tablet interest is growing.

Unfortunately for many traditional PC makers, they're not the ones benefiting from the popularity of tablets. If we take a look at IDC's data from the end of January, we see that Apple leads, with the most tablet shipments, followed by Samsung, and then Amazon.com (AMZN 3.66%) with it's Kindle line. 

Vendor

Q4 2011 Shipments
(in millions)

Q4 2012 Shipments
(in millions)

Apple

15.2

22.9

Samsung

2.2

7.9

Amazon

4.7

6.0

Asus

0.6

3.1

Barnes & Noble

1.4

1.0

Other

5.5

11.6

Source: IDC.  

According to these numbers Apple and Samsung are the only two tech companies that make computers, but also dominate in mobile. Amazon, which sells tablets solely for the purpose of selling content to its users, is beating other tech companies that have been in the game much longer than it has. Asus makes it on the list, but every other tech company that manufactures a computer doesn't even make it to the top five tablet shipments list. This is the problem for PC makers -- being lumped into the "other" category for tablet sales won't cut it in the high-stakes mobile market.

Maybe that's why Wells Fargo analyst Maynard Um said this week that he thinks the recent drop in PC sales will spur the industry into consolidation mode in the coming years. It's a likely scenario, as PC companies experience further computer sales declines without significant tablet sales increases.

Foolish investors need to take a good, hard look at where the computing industry is headed, and ask themselves whether or not their investment is going in the same direction. If more PC makers can't create tablets that consumers are willing to buy, then a chosen few, like Apple, and a handful of others will continue to dominate the market. The time has long passed for PC companies to make the transition to mobile – it's time to actually start making money from it.

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