Apple Inc. (AAPL): The Personal Computer Has Perished, Purchase Hard Drives?

According to research firm IDC first quarter personal computer (PC) shipments were down by nearly 14%. That’s a worrisome decline that scared investors out of just about every PC related stock. Still, even if tablet computers are killing PCs, there’s plenty of life in the internet’s storage providers.

A hard hit

A 14% decline is a hard hit for the PC market. David Daoud of IDC summed it up well: “Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome.” The problem appears to be tablet computers.

Apple Inc. (NASDAQ:AAPL)’s introduction of the iPad was truly an industry changing event. It was, basically, the first casual computer concept. PCs have long been the gateway to the Internet. However, most consumers use the web to do fairly simple things, like send email, surf the web, and stream movies and music. A tablet is more than capable of handling such tasks. That makes tablets both a hot gadget and a way to avoid buying a new PC.

An oldie but a goodie

The fact is that even old personal computers are more powerful than most users need them to be. Even for the things that tablets don’t handle well, such as writing large documents or creating complex spreadsheets, a computer that’s a few generations behind the times will suffice. Why trade up to a boring new computer when you can go mobile with a hot new tablet?

This means that the PC sales slowdown could actually be a good thing for Apple Inc. (NASDAQ:AAPL). Any drop in its PC sales, which are relatively small compared to its other revenue sources, will be made up by iPad sales. The recent initiation of a dividend and the subsequent price drop have made the shares potentially attractive for even middle of the road investors.

Just a connection

The thing is, Apple Inc. (NASDAQ:AAPL)’s core products make use of the Internet. That’s particularly true of tablets. Without an Internet connection, a tablet is pretty much an expensive paperweight. In fact, one of the big things lacking in mobile devices is storage. That’s one of the reasons why services like Dropbox are so popular.

Not only can you store and share information between computers, but you can actually save stuff that would otherwise clutter your valuable device space. Dropbox is a very direct example, but it isn’t the only Internet service that relies on storage.

Consider Amazon.com, Inc. (NASDAQ:AMZN) This giant retailer and tech company has massive computer farms at its disposal. Each of the computers it uses to power its site and store its information has to have a brain and a place to put stuff. Out of favor Intel Corporation (NASDAQ:INTC) is the brains in a lot of those computers, with Seagate Technology PLC (NASDAQ:STX) and Western Digital Corp. (NASDAQ:WDC) providing the storage.

Server farm specialist Digital Realty Trust, Inc. (NYSE:DLR) recently noted that it believes that about 90% of data center capacity is being used. That means more server farms are on the way. Seagate and Western Digital, which share an effective hard drive duopoly, will be called upon to make the storage for those farms.