Microsoft Corporation (MSFT), Intel Corporation (INTC): What’s Happened to PCs?

Investors shouldn’t take this to mean that if Intel Corporation (NASDAQ:INTC) sells mobile chips, it will automatically lead to better days ahead. This could be the case, but it’s largely dependent on a number of factors, including how successful Intel is within mobile, and what kind of prices it can sell these chips for. At this time, Intel doesn’t command the pricing power in mobile like it did during the PC heydays. This will likely mean that Intel will have to compete on price, which could potentially threaten its gross profit margin.

The year that changed everything
It wasn’t until last year that the assault on the PC showed up in the numbers. It took nearly 830 million devices to noticeably chip away at the PC’s throne. I don’t know about you, but that’s a lot of devices for only a 3.5% decline in annual PC sales.

I think the bigger takeaway isn’t that the smartphone and the tablet are “killing” the PC, it’s that mobile computing devices threaten to prolong the PC-replacement cycle. If consumers switched from upgrading their PCs from every four years to every five years, it would be the equivalent of killing 20% of PC demand. Since PCs haven’t seen a decline anywhere near this level, the ominous threat of mobile computing destroying PC demand is likely still a ways off.

The storm shall pass
Thanks to softness in China related to the Chinese New Year, and stricter enforcement of anti-corruption measures, IDC now expects that first quarter PC shipments could decline by as much as 10% year over year. Although dramatic, it wasn’t enough for IDC to change its forecast that calls for a modest 1.3% drop in PC sales this year. Moreover, IDC expects that PC shipments will begin to rise again in the future, driven largely by emerging market growth. By 2017, the firm expects worldwide PC shipments will reach 382 million units, which represents a more than 10% increase from its 2013 estimates. By that time, the majority of PCs should be able to compete better against the convenience features of tablets, while still offering greater productivity. Perhaps it’s a bit premature to call the PC dead?

The article What’s Happened to PCs? originally appeared on Fool.com.

Fool contributor Steve Heller owns shares of Apple, Qualcomm, and Intel. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, Intel, Microsoft, and Qualcomm.

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