The PC may not be dead yet, but the distinction between good old PCs and mobile devices like smartphones and tablets is becoming increasingly blurry. The fusion between desktop and mobile ecosystems, the rise of cloud computing and new hybrid devices mean that PCs as a standalone product category are losing relevance by the day.
Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) look like the clear winners from this revolution, while Microsoft Corporation (NASDAQ:MSFT) needs to adapt to the new paradigm before it´s too late.
Blurring the lines
According to IDC, tablet shipments will exceed those of portable PCs in 2013, and PC demand will be showing its second consecutive yearly decline this year. The research firm expects tablet shipments to outpace the entire PC market, portables and desktops combined, by 2015.
PCs are still important when it comes to business users and some particular tasks that require heavy computing power, but for many users tablets are becoming a more convenient alternative. If you are watching videos, reading, engaging in social networks and checking emails, there is really no need for a PC, and a tablet provides a superior experience.
It´s not so much that the PC is dying, but the distinction between PCs, tablets and smartphones is becoming outdated in a time in which the rise of cloud computing means that everything is stored online and easily accessible from different devices in any place at any time: consumers can choose different devices depending on particular preferences, the specific circumstance and the task at hand.
Phablets are blurring the line between smartphones and tablets, while chromebooks provide the middle ground between tablets and PCs. In a similar way, tablets like the 128 GB iPad from Apple Inc. (NASDAQ:AAPL) and the Surface Pro from Microsoft Corporation (NASDAQ:MSFT) can be considered examples of tablets approaching PC terrain by providing more power, storage and functionality.
Major industry players are making their mobile and desktop platforms converge, which is a clear indication on the fact that the old distinctions are no longer clear.
Apple Inc. (NASDAQ:AAPL) is definitely moving in that direction with its latest operating systems, OS X Mavericks for desktop and iOS7 for mobile: apps and services that were only available for iOS like Maps and iBooks have been brought to the desktop Some applications have been redesigned, and they now look much more similar in both platforms. Even the way OS X Maverics handles memory and notifications is very similar to iOS.
Google Inc (NASDAQ:GOOG) Chairman Eric Smith admitted in the 2011 Mobile World Congress trade show in Barcelona that the company aims to eventually fuse Android and Chrome OS. More recently, back in March of this year, Google Inc (NASDAQ:GOOG) named Sundar Pichai in charge of both Android and Chrome OS, which seems like a clear way to promote the convergence of its mobile and desktop operating system.
Microsoft Corporation (NASDAQ:MSFT) has developed Windows 8 as the one and only operating system for tablets and PCs, and Surface Pro is a clear attempt to build a single device that can be used as both a laptop and a tablet. Office 365 is bet on cloud computing, which seems to be doing pretty well considering that Microsoft Corporation (NASDAQ:MSFT) announced last month that there are more than 1 million Office 365 home premium subscribers.
Investment implications
Whether we say that the PC is dying, or that the dividing lines between PCs and mobile devices are getting blurred, the implications for different players are the same. At the end of the day, companies need to make sure they are well positioned to adapt and thrive in a computing industry in which the PC is not the center anymore; computing will become increasingly mobile and cloud based over the next years.
Google Inc (NASDAQ:GOOG) makes most of its money from advertising, so it doesn´t need to worry too much about selling hardware or software for a profit. Instead, the company needs to make sure it retains a big portion of the traffic in the mobile revolution. That´s why Google allows hardware manufacturers to freely use its Android operating system, and it also builds enormously popular applications for iOS like Gmail, YouTube, Maps and Search among many others.
Android is the leading platform in smartphones, and it has been rapidly gaining market share in tablets too. As if that weren´t enough, Google builds many of the most popular iOS applications, so Google Inc (NASDAQ:GOOG) looks exceptionally well positioned for the death – or transformation – of the PC.
Apple Inc. (NASDAQ:AAPL) has benefited enormously from innovative products like the iPhone and the iPad. Although growth in smartphones has materially slowed down, tablets still offer plenty of potential for the company, especially the much-successful iPad Mini.
The company will probably need to accept lower profit margins in order to effectively compete versus low cost Android devices, but Apple Inc. (NASDAQ:AAPL) has a sticky ecosystem, strong brand differentiation and loyal customer base, so it has good chances to continue thriving in the new computing world if it plays its cards well.
Microsoft Corporation (NASDAQ:MSFT) is in a more complex situation, the company is still a major player when it comes to productivity, but it hasn´t been able to gain much market share in tablets or smartphones. Windows 8 is a well-intended move aimed at inserting Microsoft in the new paradigm, but the product has not gained much traction among consumers so far. Time is running out, and Microsoft Corporation (NASDAQ:MSFT) needs to adapt to the post-PC world if it’s going to remain a relevant player in the tech industry.
Bottom line
The PC is dying, or changing; however you want to say it, the computing industry is going through a major transformation. Both Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are not only responsible for this change, they look well positioned to continue profiting from it in the long term. Microsoft, on the other hand, is facing a serious challenge, and the company needs to prove to investors that it can adapt and thrive in the new computing paradigm.
The article Investing to Profit From the Death of the PC originally appeared on Fool.com and is written by Andrés Cardenal.
Andrés Cardenal owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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