Pity the poor PC: First the iPad, now iCloud

Tablet sales are up, PC sales are down, and here comes iCloud. What's poor Michael Dell to do?

This has not been a great year for the PC industry -- and it's about to get even worse. With sales of mobile devices exploding, Gartner yesterday downgraded its forecast for PC sales this year to 9.3 percent or 385 million units from 10.5 percent.

Sure, lots of execs in other industries would kill to have a growth rate that high, and 9.3 percent is much higher than the projected growth of the entire economy. So why am I singing the blues for Michael Dell? In a word: momentum. Tablets, smartphones, and the cloud have it. PCs and PC-centric companies like Dell and Microsoft don't.

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A tale of lowered growth would have been far less doleful five years ago. In those days, a dip in sales would have been due to one of two factors: either a temporary slip in the economy or a buying pause as businesses and consumers delayed purchases while they waited for a new operating system from Microsoft.

Not this time. The recession is certainly a factor; businesses are spending less on everything, and so are many consumers. But is anyone sitting around thinking, "Gosh, Windows 8 and its cool touch interface will be here in 2012. Don't want to buy a PC now." But you can bet your butt that when the iPhone 5 (or 4S, as the case may be) rollout is close, the excitement meter will be off the chart.

What we're looking at is a perfect storm: The mobile revolution, the desire of consumers to accumulate digital content at home, and the consumerization of IT are together swamping the PC.

Netbook sales sliding
One telling point in the Gartner forecast is the cratering of netbook sales. "Consumer mobile PCs are no longer driving growth, because of sharply declining consumer interest in mini-notebooks [aka netbooks]. Mini-notebook shipments have noticeably contracted over the last several quarters, and this has substantially reduced overall mobile PC unit growth," says Ranjit Atwal, a research director at Gartner.

The PC industry, including Intel, invested tons of marketing and development money in those little guys, and after an initial burst of sales to early adopters, people didn't want them. Why? They were like buying a Yugo instead of a Toyota. Stripped down and underpowered, they simply weren't interesting.

The failure is all the more striking when you look at what Apple was doing at the same time. At the height of the miniboom in netbook sales, Steve Jobs was catching flack from pundits who thought he should produce a mini MacBook. He refused, instead focusing the company's energy on the iPad. We know how that worked out. As of the last quarter, the biggest drag on sales of iPad 2 was lack of capacity to meet demand. Simply put, Apple is selling every single one it can produce. Wouldn't Michael Dell like to be in that position?

The Gartner report maintains that sales of tablets are, by and large, not responsbile for the falloff in PC sales. "They don't overlap enough in function," says Gartner analyst George Shiffler. But people who can afford them may well be extending the life of their existing laptops and using the money they've saved to buy a tablet rather than a new laptop. 

Although Gartner might be slower than some of us to predict the fall of the PC, the research company is changing its methodology to reflect the mobile consumer revolution. By the end of the year, Shiffler told me, Gartner will issue a unified forecast that encompasses several computing devices, including laptops, tablets, smartphones, and cellphones.

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