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New Apple iPad kicks PC industry while it's down

Tablets, and the iPad in particular, are part of the perfect storm hitting top PC makers; can ultrabooks boost the competition?

March 8, 2012 06:52 AM ET

Computerworld - With the unveiling of Apple's latest iPad on Wednesday, PC makers must accelerate efforts to keep the tablet from taking a bigger slice of their business.

Some of the top PC players are already struggling.

Hewlett-Packard, the world's biggest PC maker, saw its profits plunge in its first fiscal 2012 quarter as consumers, and even enterprises, were already looking more closely at replacing or augmenting PCs with cool tablets.

Now, Apple has upped the ante with a new iteration of the world's most popular tablet.

"The iPad is cutting into PC sales and PC companies really won't have a strong response until Windows 8 ships later in the year. So they have every reason to be concerned," said Rob Enderle, an analyst at the Enderle Group.

"[Tablets are] clearly having a sharp impact on [PC] growth. While they don't truly replace a PC, folks who buy an iPad typically hold off on buying a new PC. And more frightening is that when they do buy, they appear to be trending towards Apple products," Enderle added.

During the unveiling event Wednesday in San Francisco, Apple officials said the new iPad will be faster than its predecessor and its screen will have a considerably higher resolution.

PC makers like HP, Dell and Lenovo must be drooling with envy over the product anticipation and feverish buying that came before and after yesterday's event.

The PC market could use a shot in the arm as PC growth continues to slow. In the third quarter of 2011, for instance, the overall PC market grew by only 5.5%, according to a report from IHS iSuppli.

HP cited plunging PC and printer sales when it disclosed late last month that its profit plunged 44% in the quarter that ended Jan. 31, and Dell said its first-quarter profit declined by 18%.

iPad sales
(millions of units)

Quarter ending Sales
Jun-10 3.3
Sep-10 4.2
Dec-10 7.3
Mar-11 4.7
Jun-11 9.3
Sep-11 11.1
Dec-11 15.4
Source: Apple earnings statements

Industry analysts say it's going to take a lot of work for HP to get back on track. "Tablets are a part of HP's pain but only a small part," said Charles King, an analyst at Pund-IT. "Two-plus years of disarray in the company's leadership is a more fundamental issue."

While analysts generally agree that HP's wounds are mostly self-inflicted, the popularity of tablets like the iPad isn't going to help the PC leader or its traditional rivals convince users to refocus on laptop and desktop computers.

"The iPad is having an effect on the PC business, for sure, but the magnitude isn't clear at all," said Dan Olds, an analyst at Gabriel Consulting Group. "For most iPad users, the iPad isn't their only computing device.



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