The battle between the old guard of computing and new forces threatening to sweep it away looks set to heat up in 2011.
The days appear to be numbered for consumers meeting all their computing needs in the standard fashion of buying a Dell computer, with Intel processor, Seagate hard drive, Logitech mouse and keyboard and running Microsoft’s Windows operating system, with perhaps Adobe media editing software.
All of those companies see their market share coming under attack from competitors offering mobile tablet devices and smartphones, such as the Samsung Galaxy Tab, with typically Arm-based processors, flash memory, Android operating systems and with no need for a mouse, keyboard or packaged software as they stream services over high-speed connections.
Consumers’ new love affair with these smart mobile devices is prompting many analysts to look ahead to 2011 and reassess the future of companies that have dominated the traditional PC market.
Morgan Stanley predicts that two-thirds of Dell’s revenue and half of its operating income base are at risk from declining PC and server growth in 2011. Its analysts blame two factors – consumers adopting tablets and avoiding or delaying notebook purchases, while businesses buy simpler, cheaper desktop machines that run applications and services delivered to them from “clouds” of datacentre servers.
Goldman Sachs predicts that Intel will face challenges in 2011 and beyond from the rise of tablets. Its share in tablets will be modest in 2011, it suggests, and, longer term, its PC customers are working with chip designer Arm. Microsoft may enable Windows for Arm processors, providing Intel with increased competition.
Rich Beyer, chief executive of Freescale, which provides processors for many eReaders including Amazon’s Kindle, says the x86 PC chip architectures used by Intel and AMD face some healthy competition.
“There is a shift taking place – as smart mobile devices proliferate, the market will open up and ourselves and other semiconductor and operating system companies will be sharing in what has effectively been a pure PC x86 Window market until now,” he says.
Jen-hsun Huang, chief executive of chipmaker Nvidia, says 2011 will be the year of “superphones” and tablets. Traditionally a graphics card maker for the PC industry, the company has diversified with Tegra processors for mobile devices and Tesla units for high-end servers.
The PC will remain important, he says, but “everyone had better be well-positioned in mobile and cloud computing, because that’s where the new growth is coming from. The whole supply chain is affected from retailers, where consumers buy their computers from a Verizon store rather than Best Buy, to the software industry, where people aren’t buying shrink-wrapped products but are downloading apps and services over the air.”
Nomura analysts predict that 50m tablet devices will ship in 2011, prompting a strong cannibalisation effect that will cause the netbook market to fall by 34 per cent to 25m units.
They extrapolate this to the entire PC supply chain, predicting hard times for non-tablet component makers from Seagate and Western Digital hard drive makers, to makers of hinges, non-touch screens, keyboards and mice.
Jim McGregor, chief technology strategist at the In-Stat research firm, sees 2011 as a year of a consolidation and one that sees “the beginning of the end of several technologies and high-tech companies.
“Mobile platforms are now becoming the innovators in terms of software, [user interfaces] and even hardware technology, further increasing the divide and lessening the value proposition of the traditional PC, as well as its share of the mobile processor [market], which will drop below 10 per cent by 2014,” predicts In-Stat in a report.
Traditional PC operators will be driven into the data centres where they will compete for fewer customers, says James Staten, cloud computing analyst with Forrester Research.
“The fortunes of the big companies are going to be controlled by a smaller and different customer base. For someone like HP with perhaps 500 companies representing 80 per cent of its revenues, that could become five companies, and if one says it feels like buying Dell this year, that would represent a huge change.”
However, Warren East, Arm chief executive, sees a strong future for PCs
“There are all kinds of apocalyptic scenarios, but personally I’m not a believer in the end of the PC – it offers different functionality and there’s no way we’ll see PCs disappear over the next five years or so,” he says.
Mooly Eden, head of Intel’s PC Client group, will introduce its next-generation processor code-named Sandy Bridge at the Consumer Electronics Show in Las Vegas next week, which combines graphics and general processing functions on the same chip.
He argues that extra computing power will allow PCs to offer more than tablets, with features such as gesture recognition trumping a tablet’s touch screen.
“You will see at CES there are many things you will be able to do with a notebook that you couldn’t do a year ago.”
Notebook and desktop sales are still running at more than 1m units a day and notebooks have topped consumers’ wish lists for the past three years in surveys, he adds.
“The tablet is the new kid in town, but don’t forget his big brother.”