Post-PC? Not So Fast

An Economic Argument for the PC's Survival

After Hewlett-Packard's announcement on Thursday that it planned to spin off its consumer PC unit, many were quick to pen obituaries for the PC epoch. The iPad , the thinking goes, has dealt the knockout blow to the personal computer, just as it turned 30 . No doubt there's some truth in this. A portion of the market is heading toward a " post-PC " environment. But the masses still lag behind and probably will for some time. At the moment, the general market isn't even close to being there. If anything, the end-of-an-era pronouncements say more about the tech blogosphere's skewed perspective than anything else. But despite what pundits observe at cafes , Apple isn't the dominant supplier of notebooks and a fairly small amount of the public -- roughly 1% -- has an iPad. HP's exit from the market, meanwhile, actually signals that attempting to brand yourself mid-tier in the market is futile.First, let's look at the numbers. Apple has sold about 28.7 million iPads since the device hit the market in March 2010. That's an impressive figure, to be sure, and Apple is clearly dominant in the tablet PC market. But compare that to the 400 million licenses of Windows 7 that Microsoft has sold since its July 2009 release. Moreover, those iPads don't seem to be replacements for desktop or laptop devices. Owners of iPads are "not likely to report they're making tradeoffs on purchases," says Sarah Rotman Epps, consumer analyst with Forrester Research, who also notes that owners tend to be "relatively wealthy individuals." The real problem dogging PC manufacturers such as HP and Dell isn't the iPad or the burgeoning of the post-PC era, but a confluence of factors, including the economy, the Windows upgrade cycle ( Windows 8 isn't due until late 2012 or so) and commodification. The PC industry has suffered from the latter since the mid-'90s, but things have been stepped up of late, Epps says. HP is making a 2% to 6% margin on its consumer PCs, and getting consumers to spend more seems like folly. In fact, this is how Apple is killing off rivals such as HP and Dell in a roundabout way: Consumers decide if they're not going to spend the extra money to buy a Mac, they might as well get the cheapest PC they can find. The race to the bottom is one reason that HP is exiting the business. However, concluding that just because Apple is growing market share at PC makers' expense means that no one is buying PCs anymore is a mistake. Even if you lump in iPad sales, as researcher Canalys recently did, Windows PCs still have an 82% market share . Is that majority of the market likely to make the switch to iPads and Macs?If you live in New York or San Francisco, it may seem that way, but the rest of the country may not be on board for the revolution. Consumer spending per household fell by 2.8% in 2009, which was the first time that happened since the Bureau of Labor Statistics started tracking such data in 1984. A recent report by Bernstein Research called "U.S. Telecommunications and Cable & Satellite: The Poverty Problem" points out that consumers on the lower end are often choosing between telecom services and their next meal and opting for "good enough" services like Netflix rather than pay TV. As the report goes on to explain, U.S. households at the lower 40% of income really don't havedisposable cash. That will frustrate the growth of post-PC items like smartphones and iPads. The other factor to consider is that, as Canalys notes, businesses are quite happy with their PCs. "We have been encouraged by the popularity of Windows 7 and the willingness of businesses to replace their install base," said Canalys principal analyst Chris Jones in a release. "High-performance PCs are still clearly seen as a major driver of business productivity around the world." Moreover, "few businesses had yet to replace notebooks with pads or smartphones," the release states. Canalys expects that it will be a long time before businesses can overcome security concerns and application compatibility issues and embrace the so-called post-PC world. The mass of consumers who are not thriving in this economy may feel the same way. When you're pinched for cash, you start running your household like a business, scrutinizing every expense. At that point, an iPad may seem more like a luxury than a necessity and a Wintel PC may look like a great bargain.