The PC Industry’s Worst Nightmare

September 9th, 2010

Just the other night, while watching the DVR playback of a TV show, I had to fast forward through several iPad ads. It seemed almost every other station break had an iPad announcement, the very same one! You just know Apple was sending a message, and not just to potential customers.

Now running the same spot repeatedly might also be an accident of scheduling. An agency places the ads in random rotation, and sometimes random means consecutive, or maybe Apple felt the demographics of the show in question were closely aligned with the most likely iPad buyers. Or they sought saturation.

But there’s more.

When the iPad was first announced, industry analysts couldn’t figure out what to make of it. They came up with sales predictions that were all over the price, but mostly seriously underestimated the real consumer demand. They couldn’t reconcile the iPad with existing attempts to sell tablet-based computers that, aside from some business sales, were abject failures.

One estimate put total sales for all tablets in 2010 at five million. The iPad confounded most everyone, except possibly Apple, with 3.27 million units sold during the first quarter. Published reports have it that production has been ramped up anywhere from two to three million copies per month, and now there’s an estimate from UBS analyst Maynard Um that some 28 million may be sold in 2011.

If Apple gets anywhere near that, they will surely put Mac sales way back in the rearview mirror. Even the most optimistic estimates for next year peg sales of Apple’s original flagship product as roughly four million per quarter in 2011.

Yes, I know there are loads of iPad pretenders due out by then, most of which will likely run Google’s Android OS or the Chrome OS. There’s also the misguided assumption that Apple must fail in the mobile space because of their closed platform. It’s all a replay of the Mac versus Windows wars, where Microsoft emerged triumphant.

Without going into detail, there were other reasons besides that closed ecosystem that hurt the Mac in days of old, including Apple’s chronic marketing failures. Indeed, when Apple did license the OS and hardware designs to third parties, just as they were repeatedly asked to do, that action nearly killed the company. The skeptics got what they wished for, but the results weren’t quite what they expected.

Nowadays, the PC industry is really scrambling after tepid summer sales. It doesn’t appear that sales of the Mac have been impacted; they are still reported to be increasing faster than the industry as a whole.

But what about the iPad? Is it cannibalizing sales of other computers, and, if so, which ones? The industry analysts who are looking at the situation suggest that sales of the cheapest PCs are tanking, and companies who staked a lot on the low end, such as Acer, are due to be hurt the most.

If that’s the case, the PC box makers deserve to lose because they underestimated the public’s taste. The typical netbook doesn’t show a whit of innovation. It appears all the PC companies did was to make them as small as possible, using the cheapest components available. Little thought was given on how a tinier form factor PC would function with miniaturized versions of the standard components. I suppose they also hoped that customers might even upgrade to something better, rather than, having been burned once, buying someone else’s product, such as an iPad.

So is the iPad killing the netbook? Certainly you can buy netbooks for less than $300, so why spend upwards of $200 extra for an unproven gadget, one that can’t even run standard Mac software? Does that make sense?

Of course the iPad buyer profile is probably complicated. Many buy them not to replace the family or office Mac or PC, but to have a simple portable device that will let them postpone a computer upgrade. An iPad may also serve as an extra gadget.

If one’s need of a computer can be met with the apps Apple provides on the iPad, or are available from the App Store, it may well be that the iPad can replace a personal computer in many cases, particularly if you are more of a consumer than a creator.

On the long haul, Steve Jobs has told you all about Apple’s future direction, although not everyone is listening. The iPad and its successors are meant as the personal computers of the future, the ones that will take over the industry for the vast majority of people. Yes, the traditional PC desktop and note-books will still be around, but sales will not be near as high. It’s not that the era of the PC is over so much as the likely prospect that it will morph into a different sort of machine. Apple is betting it’ll be the iPad, and the rest of the PC industry clearly doesn’t know what to think. They’ll try anything, from regular PCs, to mobile devices that may also have “Pad” in the name, perhaps to fool people into thinking it’s all the same.

As most of you know, it’s not the name but what’s behind it that counts.

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10 Responses to “The PC Industry’s Worst Nightmare”

  1. Blad_Rnr says:

    A great summation of currents events and trends in the PC industry. I have to wonder if some major players won’t fold or get eaten up by another company. Let’s face it: the PC industry is all about low-cost computers. If the low end netbooks start to tank, and mid-range PCs start to also decrease in sales, who stands to make any money when they already have razor-thin margins and they have no solution to the iPad?

    And I seriously doubt MSFT will have anything like the iPad. It’s a mixture of hardware and software that is too tight to duplicate. I suppose Google will have an Android version, but who cares when they won’t be making any money from it. And if manufacturers can dismiss Google as the default search engine, why should Google continue to play? Let’s also consider the very serious lawsuit from Oracle. From what I have read it could wipeout Android and force Google to start from scratch.

    No matter what, Apple needs to continue to strike while the iron is hot. The ad blitz is certainly trying to drive even more sales while manufacturing is starting to meet demand.

  2. Wilbur Wrong says:

    I’ve had my iPad since day one, and I use it at least two hours a day…for reading books, surfing the web, email, etc., and I’ve hardly touched my MBP since the iPad joined our stable of Apple products.

  3. Tom B says:

    Pre-iPad: (1) expensive, not very useful tablet PCs (2) inexpensive, but cheap and slow netbooks

    After iPad: fluid, useful tablet features in a well-built, FAST package at about the same price as a netbook.

    This is what I was telling people when the talking heads were all saying the iPad was doomed. Apparently, the consumer new better.

  4. iphonerulez says:

    The Windows netbook can go to hell. They were inexpensive pieces of crap when they came out and nobody in their right mind will mourn their passing except for Microsoft and Steve Ballmer. They can kiss about 20 million OEM Windows 7 licenses goodbye over the next year. That’s another reason why that Acer president prick was bemoaning the fact that Apple is kicking his company’s ass. He wanted his company to keep churning out $250 notebooks that are worth $200 for another couple of years. Now his company is stuck with a whole stock of useless netbooks (or netbook parts) that consumers no longer need or want.

    Nobody is twisting consumers’ arms to buy Apple products. Maybe if Acer had some decent products that people would be willing to pay for, he wouldn’t have such sour grapes and be blaming Apple for somehow ruining the computer industry as he sees it should be. An innovative company shouldn’t just follow the crowd. I suppose Acer is a copycat company and they just blindly duplicate everything as long as they can. Apple is willing to take the risk of a brand-new product and it can fail or reap the rewards. I seems as if this Acer jackass is saying that Apple shouldn’t have built the iPad because it didn’t fit in some proper niche or something. Or he’s upset that Apple shouldn’t have created the iPhone so that everyone could still be carrying RAZRs.

    Dammit, I hope that Apple “iPads” the world to death in every sector you can name. Medical, sales, engineering, education, media. I hope the top executives in the corporations storm down to IT and demand those Windows-loving lackeys to implement iPads on every level. I want to hear Microsoft cry uncle and shut the hell up about needing some bulky Windows desktop PC on every desk in the world. I know for a fact that every consumer does not need a Windows PC in their home. Maybe the days of Microsoft completely controlling the whole computer industry will be coming to a close.

  5. jase says:

    Nice article Gene. The iPad form factor is the future of personal computing. Not only are people going to buy a tablet computer instead of a netbook or a laptop, but I also believe that people are going to delay upgrading their existing PC. I don’t really care about having a faster or better PC anymore if I am using my iPad most of the time.

  6. Andrew says:

    I love my iPad, but I have no illusion that it can replace a computer as of yet. What it can do, however, is allow me to do enough without needing a full computer that the full computer will be used far less, and last much longer.

    It really is a game-changer.

    • jase says:

      @Andrew, Agree 100% Andrew.

      I honestly did not think that a larger display would be that much different from my iPhone, until I started using an iPad last week. But the 9.7 inch touch screen changes the whole experience. The form factor is perfect.

  7. dfs says:

    I think you can talk about tablets vs. netbooks, but not about iPads vs. netbooks, because sooner or later the market is going to be flooded with a bunch of competing tablet products. Most of these will be crap and their only selling-point will be their low price, but it would be just as wrong to think that nobody else is capable of marketing a halfway-decent tablet than that nobody else is capable of marketing a halfway-decent smart phone. Apple enjoyed a window of maybe a year to 18 mos. when the iPhone has the market to itself before any significant competition cropped up. Same here. This means that Apple has a limited time to improve the iPad, for inst. by adding a camera and making it a lot easier to transfer data in and out. Likewise, we need a new generation of wireless printers and a means of routing data directly from the iPad to the printer (which I guess means it needs to be able to handle printer drivers). If any rival tablet appears that has capacities like these before the iPad does, then it’s going to put a large dent in iPad sales.

  8. Reginald Wagner says:

    I picked up an iPad to use for a bit before loaning it to a nephew who had a stroke and now has mobility and speech issues. I had only used another nephews iPod Touch for a bit, didn’t do any app purchases or much else, only had an iPod Shuffle for my own use. I do miss the iPad and I’m contemplating on whether to get another iPad (bigger RAM and maybe/likely 3G) or to go with a new iPod Touch, but I’ll have to look at the new Touch before I decide.

    The iPad requires a bit of getting used to, as it is NOT a Mac or Windows PC. The touchscreen keyboard is definitely different from an actual keyboard, but the iPad was not horrendous to use, just different, and it didn’t take me long to adjust to it for the most part.

    iTunes is not that bad to use to sync the iPad to a computer but it does a lot of stuff. The major complaint about purchasing apps is the differences between iTunes on the computer and the App store app on the iPad. You can’t get from iTunes the categories that are in the App Store app. There is a link I came across for a browser to look through the categories, but how many ways do you want to look at apps?

    The REAL bugbear for me was the App Store app where you have forward and backward arrows to move through multiple THOUSAND apps per category, twelve apps at a time, starting at the first app in release date order or by name. And if you select one of those apps to buy, it kicks you out of the App Store to download the app, and if you go right back into the App Store, it puts you back to the first app in the category. Can you go quickly back to where you were? NOPE! Press the arrow key a hundred times to go back to where you were, because you can’t say to go to app 1234 of of 5000 apps!

    Don’t know who designed this interface for the App Store app, but they are IDIOTS! Hopefully this gets fixed, because this makes trying to look through apps a complete PITA.

    Other than this one App Store app issue, I enjoyed the iPad. Portability is the way to go, the iOS devices have a good interface, very good and solid hardware, a growing infrastructure of songs, video, apps, books and whatever else the iTunes/App/iBooks stores are selling.

    The ability to easily buy an app for an inexpensive price and to be able to sync those apps with MULTIPLE iOS devices is the thing that give Apple a BIG advantage. Most, if not all, of the other App stores will tie the purchased apps to a device, whereas Apple is tying the apps to an iTunes account that supports however many iOS devices you attach to the computer with iTunes.

    I think this is why so many Windows users want a Windows tablet, so they can use the software they already own on a new form factor, rather than having to buy their apps all over again. It is the reason that Parallels and VMWare sell so well on Intel Macs, as it allows people to continue to use their old software while they learn the new software of the Mac and buy new apps as they become used to the Mac. Been there, done that, going from Apple II to Mac OS 1 through 9 to some PC DOS/Windows stuff to OSX and soon iOS apps.

    Technology marches on and obsoletes so much stuff from before. Technology is an EXPENSE, not an investment. Technology is a TOOL, and by using the better tool, one can make something from the expense of buying the tool. Your opinion/mileage may vary of course.

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