PC Industry Fights to Adapt as Tablets Muscle In

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SEATTLE -- The death of the personal computer may be an exaggeration. But the industry around personal computers seems to be in limbo.

Like the mainframe, which was said to be dead decades ago but has remained a meaningful business, the PC will almost certainly cheat death. True, mobile devices like the iPad will continue to gore PC sales. Those mobile devices, though, will most likely never satisfy spreadsheet masters, film editors and other workers who depend on multiple screens and the precision of a keyboard and mouse.

Still, there is a strong view among many longtime tech executives that the PC's relevance will steadily diminish.

"In my humble opinion, the PC as we have known it is in a continuous decline and being relegated to a utility device for businesses," said Hector Ruiz, the former chief executive of Advanced Micro Devices, a company that makes chips for PCs and other devices.

The mood around the PC industry has become increasingly glum. The business is effectively in a recession, and there is no upturn in sight. During the second quarter of the year, global PC shipments fell around 11 percent, for their fifth consecutive quarter of declines, the worst downturn since the advent of the PC more than 30 years ago.

Intel, supplier of the chips in most PCs, and Microsoft, which makes the Windows operating system on the vast majority of those machines, have delivered disappointing financial results. An overhaul of Microsoft's software, Windows 8, did not lift sales and may have made them worse.

The once-mighty Dell, deeply weakened by the PC slump, is mired in a struggle with shareholders over a plan to go private, seeking relief from investor pressure. In their bid to take the company private, Michael S. Dell, the founder, and the investment firm Silver Lake have argued that they would turn the company into a corporate software services provider. A vote on Dell's future is expected this week.

While sales of PCs to businesses remain steady, demand among consumers has plunged, largely because people are instead buying iPads, Kindle Fires and other tablets.

Still, a reality check: more than 300 million PCs are expected to be shipped this year globally. That is a lot of widgets for a business that has caught a cold.

Tablet sales are growing explosively. This year, there are expected to be more than 200 million shipments of the devices, which will for the first time exceed shipments of notebooks, the largest category of PCs, estimates Gartner, the research firm.

Steven P. Jobs, the Apple chief executive who died in 2011, predicted several years ago that PCs would become something like trucks, workhorses used by many people but outnumbered by tablets, the cars of the technology business. (The analogy is somewhat undercut by stats: the most popular vehicle in the United States for several years has been a truck, the Ford F-150.)

One theory is that tablets are leading PC shoppers to postpone purchases of new computers, perhaps by a year or two, but that eventually people will be ready for a fresh machine. "Replacement cycles are being pushed out," said Toni Sacconaghi, an analyst at Bernstein Research.

A more pessimistic view is that a lot of the consumer demand for PCs will never return. Daniel Huttenlocher, the dean and vice provost of Cornell University's new New York City technology campus, said consumers began buying PCs in big numbers beginning in the 1990s largely because no better device existed for getting on the Internet.

But the PC, he said, was always better suited as an office machine for the production of documents, presentations and other work. In his view, tablets are better for the consumption of content, whether that is watching Netflix or surfing the Web.

"There are way more consumers than producers, period, even in a world with lots of user-generated content," Dr. Huttenlocher said.

In the first quarter, 53 percent of computer shipments were to the consumer market while 47 percent were to the commercial market, estimates the research firm IDC.

Many consumers will still favor PCs for tasks like editing home movies and writing term papers. But tablets are already invading the turf of PCs in many professional niches, from flight manuals for airline pilots to cash registers in restaurants.

The incumbents in the PC industry -- especially Microsoft and Intel, the software-chip duopoly with the most to lose from the decline of the business -- have a seemingly straightforward response: redefine the PC to make it more tabletlike. Microsoft designed Windows 8 to work well on touch-screen devices. If users tire of finger gestures, they can switch to a classic Windows desktop interface that they can operate with a mouse and keyboard.

Intel, meanwhile, has refined its chips so that they are more thrifty with their consumption of battery power, an important requirement for mobile devices.

The changes have given rise to a frenzy of crossbreeding in devices, effectively blurring the boundaries between PCs and tablets. Now notebooks can turn into tablets either by flipping their screens or through fully detachable displays. Many otherwise ordinary notebooks come with touch displays for quickly jumping between different modes of operation.

Microsoft and Intel are betting that devices coming out in the fall will finally get PC shoppers back in stores. Microsoft plans to release a new version of its operating system, Windows 8.1, that responds to complaints its customers had with the earlier version.

"What you're going to see over the next few months is a lot more designs from every PC manufacturer," said Adam King, a director of product marketing at Intel.

Using the automotive analogy of Mr. Jobs to different effect, Frank Shaw, a spokesman for Microsoft, said the car business kept subdividing into many categories, including luxury models and electric vehicles. "You can say the same thing is happening in computing," Mr. Shaw said.

Anand Chandrasekher, the chief marketing officer of Qualcomm, which supplies chips for some mobile Windows devices, says he expects Microsoft will successfully adapt to the changes in its business. "I admire Microsoft for the changes they've made," Mr. Chandrasekher said. "We're bullish that they will have a strong presence in the marketplace."

Some people are deeply skeptical that creating a new hybrid class of devices will help stop the momentum of tablets from Apple and companies with devices based on Google's Android operating system. Marc Benioff, the chief executive of Salesforce.com and a frequent Microsoft antagonist, said customers had already shunned new types of devices, like Microsoft's Surface.

"The reason why they're not accelerating growth is for one simple reason," Mr. Benioff said. "There's a better technology."

Whatever happens to the PC business, the iron grip that companies like Microsoft and Intel once wielded over hardware makers appears to be no more. Hewlett-Packard now makes a notebook using Google's Chrome OS software and a tablet based on Android, Google's mobile operating system. Lenovo, the world's top seller of PCs, is big seller of Android smartphones and tablets, especially in China.

In an earlier era of computing, those would have been considered intolerable acts of disloyalty.

"We're a device company," said Gerry Smith, a Lenovo senior vice president and head of its Americas division. "We're agnostic on hardware and agnostic on software, whether Android or Windows."

Meanwhile, Microsoft has struggled to maintain its influence with software developers, which have gravitated in ever greater numbers to Apple and Google's mobile technologies.

Aaron Levie, the chief executive of Box, an online storage company that has developed software for Windows 8, said that influence was once Microsoft's most powerful asset.

"It wasn't the absolute value of the technology," Mr. Levie said. "It's that you have mindshare and ecosystem support. Microsoft is now in a very different world these days."

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This article originally appeared in The New York Times.


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