Microsoft’s chief technology officer Craig Mundie seemed to have his head buried deep in the sand a few weeks ago when he commented that tablets may just be a fad.Crazy, right? The first iPad sold more than 15 million units in three quarters. Other smart tech companies are racing to meet the demand with tablets of their own — Google, Hewlett Packard, Research In Motion, Motorola, Samsung, they’re all in the game. Even Microsoft is racing to make sure the next version of Windows runs on touch screen tablets.
But what if he was right?
What if the analysts predicting that tablets will cut into PC sales turn out to be using faulty data? What if Acer’s horrible recent performance is more about Acer’s specific shortcomings than the PC market as a whole?
Some interesting data points from the last week bear another look:
- Intel reported earnings way ahead of Wall Street’s estimates, with growth across the board. Most surprisingly, the company’s PC business — which accounts for the vast majority of its revenue — showed revenue growth from 17% from last year and 12% from the fourth quarter.
- Apple also had a great quarter, but iPad sales were much worse than expected — Apple shipped only 4.7 million of them versus 6 million expected.
- RIM’s PlayBook shipped only 50,000 units on its first day, and is generating exactly zero excitement among consumers.
There are counters to all of these points. Chip analysts note that Intel’s growth may be due to an unnecessary inventory build-up by its customers — it’s happened before — and some expect a correction later this year. Apple actually sold through more iPads — 5.1 million — than it was able to ship, and would have sold even more if it could have gotten the components. The PlayBook tanked because the first version is deeply flawed — the irrepressible Galen Gruman at Infoworld called it “a useless device” and compared it to a homeless guy playing air guitar in front of the mall. (It’s one of the best bad reviews we’ve read in a long time.)
But there’s other evidence against tablets as well. The Motorola Xoom — the first real Android tablet — is also selling poorly. Anecdotal reports from iPad users suggest they don’t use it all that much after the initial excitement wears off — it’s more of a secondary “nice to have” device than an actual computer replacement.
Here’s a theory. The tablet explosion isn’t about tablets. It’s about the iPhone.
Three years into the iPhone, a fair proportion of users found themselves spending more time than they ever expected doing tasks they previously would have used a computer for — email, Web surfing, reading, and playing games. At some point, these folks realised it would be great if they could do the same things on a bigger device with a more usable keypad.
The iPad met their needs. As more iPhones sell — 18 million last quarter! — a steady proportion of buyers will find themselves in that same situation. A lot of those people will become iPad customers. Good for Apple.
But there’s probably a large number of iPhone users who mainly use their phones as phones, and to replace other small form devices — still and video cameras and MP3 players. They might use it for email and Web surfing in a pinch, and they might have a special-purpose app or two that they love or depend on. But to get real reading and writing done, they still turn to a computer.
To these people, the iPad is an expensive curiosity.
It’s also a fair bet that a lot of NON-iPhone users — the tens of millions of folks who bought Android phones, not to mention the hundreds of millions still using feature phones — fall into that latter camp as well.
Meanwhile, businesses are in the middle of a twice-per-decade PC upgrade cycle, driven by ageing hardware and the release of Windows 7, the first decent version of Windows since XP. Microsoft just announced it had sold 350 million Windows 7 licenses in 18 months — that compares with 180 million for Vista at the equivalent time in its lifespan. More generally, IT spending is up — both Intel and IBM (who also reported earnings this week) credited business spending on data centre hardware as bright spots.
Tablets may make some inroads into businesses — they can be good for mobile workers doing particular tasks — but it’s hard to see them replacing the keyboard-mouse-monitor set up for tasks like serious number-crunching, graphic and CAD design, and writing anything longer than an email.
Maybe the next year or two will prove that the iPad is really the beginning of the post-PC era, and tablets will increasingly replace full PCs.
But this week’s numbers suggest the traditional PC market will be with us for a while.