Reprinted from the New York Times
By NICK WINGFIELD
March 5, 2012
The chief executive of Apple, Timothy D. Cook, has a prediction: the day will come when tablet devices like the Apple iPad outsell traditional personal computers. Tablets spell the end of personal computers.
His forecast has backing from a growing number of analysts and veteran technology industry executives, who contend that the torrid growth rates of the iPad, combined with tablet competition from the likes of Amazon.com and Microsoft, make a changing of the guard a question of when, not if.
Tablet sales are likely to get another jolt this week when Apple introduces its newest version of the iPad, which is expected to have a higher-resolution screen. With past iterations of the iPad and iPhone, Apple has made an art of refining the devices with better screens, faster processors and speedier network connections, as well as other bells and whistles — steadily broadening their audiences.
An Apple spokeswoman, Trudy Muller, declined to comment on an event the company is holding Wednesday in San Francisco that is expected to feature the new product.
Any surpassing of personal computers by tablets will be a case of the computer industry’s tail wagging the dog. The iPad, which seemed like a nice side business for Apple when it was introduced in 2010, has become a franchise for the company, accounting for $9.15 billion in revenue in the holiday quarter, or about 20 percent of Apple’s total revenue. The roughly 15 million iPads Apple sold in that period was more than twice the number it sold a year earlier.
In the fall, Amazon introduced the iPad’s first credible competitor in the $199 Kindle Fire. Although Amazon does not release sales figures for the device, some analysts estimate it sold about four million in the holiday quarter. Later this year, tablets from a variety of hardware manufacturers based on Windows 8, a new, touch-screen-friendly operating system from Microsoft, could further propel the market.
“Tablets are on fire, there’s no question about that,” said Brad Silverberg, a venture capitalist in Seattle at Ignition Partners and a former Microsoft executive, who hastened to add that he was speaking mainly of the iPad, which dominates current sales.
Tablets are not there yet. In 2011, PCs outsold tablets almost six to one, estimates Canalys, a technology research company. But that is still a significant change from 2010, the iPad’s first year on the market, when PCs outsold tablets 20 to one, according to Canalys. For the last two years, PC sales were flat, while iPad sales were booming. The Kindle Fire and Barnes & Noble’s Nook gave the market an additional lift over the holidays. Apple is banking on the tablet market. Its iPad brought in nearly 40 percent more revenue during the holidays than Apple’s own computer business, the Macintosh, did.
“From the first day it shipped, we thought — not just me, many of us thought at Apple — that the tablet market would become larger than the PC market, and it was just a matter of the time that it took for that to occur,” Mr. Cook of Apple said recently at a Goldman Sachs investor conference.
Gene Munster, an analyst at Piper Jaffray, estimated that Mr. Cook’s prediction would come true in 2017, but others contend tablets will be on top sooner than that.
For example, in a blog post on Friday, Horace Dediu, an analyst with Asymco in Finland, made a detailed argument that tablet sales would pass traditional PC sales in the fall of 2013. His projections rest heavily on an assumption that Apple will face more serious competition in the tablet market from Amazon’s Kindle Fire, Windows 8 and a wave of other devices based on Google’s Android, an operating system that has been mostly successful in the smartphone market.
Tim Bucher, an entrepreneur who has held senior positions at Apple, Microsoft and Dell, said tablet sales would “absolutely” pass those of PCs, a trend he argued would become even more pronounced as a younger, tablet-savvy generation ages.
“I think the older generation does not pick up on the way of interacting with the new devices,” Mr. Bucher said, contrasting older people with the next generation. “I don’t know how many YouTube videos there are out there showing everyone from babies to animals interacting with iPads.”
Where does that change leave the PC, the lowly machine that defined computing for decades?
At a technology conference in 2010, Steven P. Jobs, then Apple’s chief executive, heralded what he called the post-PC era and compared personal computers to the trucks that prevailed in the automobile industry until society began moving away from its agrarian roots. PCs are “still going to be around and have a lot of value,” said Mr. Jobs, who died in October. “But they’re going to be used by one out of X people.”
Even Mr. Cook in his recent speech said he was not predicting the demise of the PC industry, although he did say the iPad was cannibalizing some computer sales, more Windows PCs than the much smaller market for Macs. One category of PCs where that is especially true is netbooks, the inexpensive notebook computers that have had a steep decline in shipments in the last couple of years. “What the iPad is doing is taking growth away from the PC market that would have gone to a secondary or tertiary device,” said Mr. Dediu. “It’s not so much people are going to drop PCs. They’re going to add this additional device.”
Traditional PCs are not standing still. Boxy desktop computers are an ever-diminishing part of the PC business, while Apple’s MacBook Air and a category of Windows laptops with Intel processors called ultrabooks have reinvented traditional clamshell notebooks as superthin devices that turn on instantly like tablets.
Microsoft’s introduction of Windows 8 promises to shake up computer designs further. Microsoft and its hardware partners have shown laptops with keyboards that can be swiveled around or removed altogether, turning them into tablets.
“The tablet and PC markets are all going to blur,” said Tim Coulling, an analyst at Canalys. “We’re going to see a lot of form-factor innovation. We’ll be asking, What is a tablet and what is a traditional PC?”