PC’s are on life-support right now. The ventilators, defibrillators, nurses and doctors are everywhere – and for good reason. Their patient is dying, and its obvious who will take his place. No, not their place in the hospital, their place in life. Think of it as the next successful successor.
The International Data Center (IDC) has released data showing that in 2013 overall tablet sales will outpace PC’s for the first time. Not only are tablet sales expected to increase, but IDC expects sales to decrease for the second year in a row for PC’s. Hewlett-Packard Company (NYSE:HPQ) is one of the major PC makers in the world right now. As would be expected, 2011 revenues were virtually flat from the year before, while 2012 revenues dropped nearly 6% throughout the year. In addition, the companies twelve trailing months of revenues have declined by nearly $1.7 billion since the beginning of the year, a total of 1.4%.
It doesn’t look promising for companies that are still majorly focused on the PC, but their successors are likely already in place. Companies such as Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL) have been growing – in large part because of their mobile presence. The graph below shows just how quickly the tablet market is expected to grow.
So what exactly has Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL) done that makes me believe they will continue to grow? Well first of all, Apple sold 19.5 million iPads in the first quarter of this year. IDC reports that 77 million PC units were sold globally in the first quarter of 2013 – this was 13.9% lower than the quarter before. In the first quarter of 2012, PC sales were up, but since then, have fallen drastically. Despite Hewlett-Packard Company (NYSE:HPQ) being the largest PC manufacturer in the world, IDC reports that the company experienced a 24% drop in units shipped.
Amazon.com, Inc. (NASDAQ:AMZN) doesn’t often release specific numbers on sales/shipments, but we can be assured that those figures will rise with the expansion of their markets. The company recently announced its expansion of Kindle Fire HD devices, as well as the expansion of their Appstore for Android. The Appstore will now be available in an additional 200 countries, while the its new tablet will expand by 170 international markets.
Good news for HP?
If there is hope for HP, it lies in its recent partnership with Leap Motion. While I believe Leap Motion’s gesture control technology may do very well, I don’t know if it can return Hewlett-Packard Company (NYSE:HPQ) to its prior glory. It will, however, allow contactless interaction for the first time. HP is currently including Leap Motion devices with some of its products, and will later integrate the systems into their actual devices. Depending on the success of this approach, it may help slow the decline of PC sales, but I wouldn’t expect the sales to increase.
Bad news for HP
The bad news appears obvious. PC sales are decreasing, tablets are rising, and the worst part for HP is, most people don’t replace a PC until it stops working. This is not the case with tablets. Many people are intrigued by these mobile devices and buy a new one every year, regardless of whether or not they are broken.
Valuation
With Amazon.com, Inc. (NASDAQ:AMZN) being such a young company (19 years old), many of its metrics are skewed because it’s still rapidly growing. Much of its money goes directly into capital expenditures, which is what you want for a company with so much room to run. These companies show a pretty drastic differences in some areas of valuation.
In terms of free cash flow yields, Apple Inc. (NASDAQ:AAPL) leads the pack, followed by HP, and Amazon.com, Inc. (NASDAQ:AMZN). These companies earnings yields also differ drastically as Apple is around 10%, while Amazon and Hewlett-Packard Company (NYSE:HPQ) are negative. Is it surprising that Apple shows the highest free cash flow yield and hands down the highest earnings yield? They do generate approximately 80% of their revenues from mobile products.
Dividends
Apple Inc. (NASDAQ:AAPL) will be releasing $100 billion to its shareholders by 2015, and currently has a dividend yield above 2.5%. Hewlett-Packard Company (NYSE:HPQ)’s dividend yield is near 2.0%. Again, one of the most active companies in the mobile world has the best dividend yield. Amazon.com, Inc. (NASDAQ:AMZN) is yet to issue a dividend.
The foolish bottom line
No one knows what the future holds. But, after looking it over, investors might want to take a second look at Hewlett-Packard Company (NYSE:HPQ). Amazon is not a bargain, but it’s still a young company that’s growing very quickly. Meanwhile, Apple Inc. (NASDAQ:AAPL) is largely involved in mobile sales, and still offers a great value to its shareholders. You be the judge. Which company will die first and which company will rise up to take its place.
Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Inc. (NASDAQ:AMZN).com and Apple Inc. (NASDAQ:AAPL). The Motley Fool owns shares of Amazon.com and Apple.
The article Life After Death: The Tablet and the PC originally appeared on Fool.com.
Tyler 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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