Guess What? People Are Still Buying PCs

TheStreet.com

NEW YORK (TheStreet) -- Let's face it. There are certain things a tablet just doesn't do very well. (Multitasking anyone?) That's why most consumers still use a computer and Apple hasn't given up on Macs.

And if you're like a growing number of people, you've held on to your aging desktop or laptop longer than the previous one. It's become achingly slow, but still beats a tablet for working on documents and spreadsheets. It lets you keep 20 tabs open on an Internet browser. It edits video OK and streams movies adequately. You don't really want to buy a new computer.

That's the issue for the computer industry. The machines made in the past five years were built pretty solid with future-minded features. The computer still works so why buy a new one?

"In most cases, people aren't buying laptops, but not because they don't like laptops. It's because what they have, already fits the bill," said David Daoud, research director for personal computing at IDC, a market research firm. "Everyone who needs a laptop has one, or two or three. And they work. They work for productivity, for Excel and Word documents and many or most of the online tasks like Facebook and Netflix ."


Computers outsell tablets by nearly 50%. According to IDC, 49.2 million tablets shipped worldwide in the first three months of 2013. Comparably, 76.3 million PCs shipped globally in the same period. Of course, as everyone likes to point out, the number of actual computers sold is declining (down 13.9% from first quarter last year, says IDC) while tablet sales are way up (142.4% growth for the same period), but that's another story.

"The reason why there is a feeling of doom is that it's a replacement market, which has a pretty solid install base of good technology," said Daoud, noting that a friend only just retired his nine-year-old Mac.

As in the past, computers sell when people's requirements change. Enthralled by portability, we bought laptops to replace desktops. Then we upgraded to get a built-in DVD player, Wi-Fi or Web cam. We splurged on wide-screen laptops when HD video emerged.

Today there aren't many motivating reasons to buy a new model. Not many consumers really need the latest technology anyway. Tweets don't require much computing power. People are holding on to computers for three to five years and longer, compared to two to three years last decade, according to NPD, a research firm.

While Microsoft's Windows 8 launched last fall, reception has been weak. Some say people are waiting for a possible Windows 8 upgrade -- Microsoft "Blue" (See this recent blog post.) -- to fix flaws, patch security holes and bring back the "Start" button, before the next buying spree begins.

Also, a new breed of touchscreen laptops may be tempting, especially with Windows 8, which "begs to be touched," said Daoud. But a current shortage on glass has limited production and availability.

If these issues are resolved, Daoud believes the PC market could start seeing a recovery next year.

Right now, the main motivation to buy a new computer may just be that your current one broke. Most likely, you still use a computer, even if you splurged on an iPad, Kindle or other tablet. You're just not using a computer as much as you did last decade.

"Things are down a little but people are still buying PCs," said Steve Baker, NPD's vice president of industry analysis for consumer technology. "There's still plenty of demand out there."

Baker, who has tracked PC sales for 15 years, says that yes, people are spending money on tablets. But he believes that has only expanded the computer market.



"There's a little bit of cannibalization. It's not all gloom and doom. But since I have my Windows 7 working fine, rather than upgrade right away, I'll buy an iPad. There is just a delay factor," Baker said. "The reason why there is no one upgrading at the moment is that PCs are good enough. Windows 8 still hasn't provided sufficient reason to make the consumer go, 'Aha! My PC is obsolete.'"

The PC ecosystem is going through an important transition and PC makers like Dell , Hewlett-Packard and Acer are trying to figure out how to evolve. They continue to experiment and hope that new attempts at previously niche products tempt consumers this time around: ultra-light portables (sub 4-pound laptops), nettops (mini desktops) and convertibles (touchscreen laptops that flip into tablets) are all back.

"The PC companies are trying to reinvent themselves. Dell is going private. HP is struggling with management issues and Meg Whitman is trying to make a comeback. Acer used to be a big player and it has managed well by scaling back to become a leaner company. Then there is the emergence of new players like Lenovo, which is relatively new in the consumer space. Also, Samsung and ASUS are pretty aggressive. There are a lot of moving parts in the competitive landscape," Daoud said.

Some traditional PC companies are having better luck evolving. Intel , ranked as the world's largest semiconductor company by IHS iSuppli, also makes chips for tablets. It is also behind PC makers' newer Ultrabook products, which are touchscreen convertible laptops that weigh less than 4 pounds, offer near-instant start up and have at least five hours of battery life.

"We're even more dedicated to laptops with the Ultrabooks," said Dan Snyder, an Intel spokesman. "If anything, people are saying we're getting out of desktops. To an extent, we are. We're just not focusing on traditional beige mainstream desktops as much anymore. But the touch-screen all-in-ones are growing 25 percent a year."

Analysts believe that eventually, the distinction between tablets and laptops will be meaningless.

But until then, said Daoud, "You still need to work and the tablet hasn't crossed that critical threshold to become a productivity tool."

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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