Is the desktop in its death throes?
By Jameson Berkow, Financial Post
August 27, 2010
Many have long predicted the impending death of the home desktop computer, but nobody expected the end to come so soon.
“In three years’ time, desktops will be irrelevant,” John Herlihy, vice-president of global ad operations for Google Inc., told Ireland’s Digital Landscapes Conference in March.
“I would say that is fairly accurate.... I wouldn’t be surprised if it was even sooner,” agreed Ronald Cenfetelli, professor of management information systems at the University of British Columbia’s Sauder School of Business. “And I think you’re seeing that in the marketplace right now.”
Intel Corp. hammered what could be the final nail in the coffin of the desktop PC Friday morning, when it warned investors its quarterly revenue will fall short of its own estimates. The world’s largest maker of PC processor chips said weaker-than-expected demand for personal computers will hurt Intel’s third-quarter sales to the tune of US$1-billion, possibly more.
The announcement was simply the latest harbinger of doom for desktop PCs. Market research firm Forrester Inc. says desktops and laptops in 2008 were tied, with each holding about 45% of the U.S. consumer computing market. Since then, the desktop market share has fallen dramatically, replaced mostly by wildly popular tablet and netbook devices such as Apple’s iPad. By 2015, Forrester projects the market share for desktops will be just 18%. An overwhelming majority of computing products will be portable by mid-decade.
Best known for providing the technology at the heart of many popular desktop and laptop computers, Intel has been slow to adapt to increasing consumer demand for more mobility.
“Intel really missed the boat,” said Josh Martin, senior analyst for wireless media services at Massachusetts-based Strategy Analytics. “What was it that caused Intel to be so far delayed and so far behind everybody else I don’t have an answer for that,” he said. “It is definitely going to be an uphill battle for them.”
The company has been scrambling to catch up in recent weeks to such leading mobile chip makers as Qualcomm Inc. Last week, Intel announced its largest-ever acquisition, paying US$7.68-billion for security software firm McAfee Inc. Intel said the purchase was motivated from a desire to embed better security features into its processors. However, industry analysts argue the move had more to do with Intel’s efforts to break into chip making for mobile devices, which tend to require more enhanced security features.
Those arguments were validated Friday, when Reuters reported the U.S. chip giant could finalize a deal this weekend to purchase the wireless processor unit of German chipmaker Infineon Technologies AG.
Intel would indeed be wise to shift its development focus away from desktops, sales of which have been falling precipitously for some time now.
“The desktop business has been slowly declining over the last three years,” said Allan Kambeitz, merchandising director for Best Buy Canada. “So what we’ve done in that business is we’ve tried to minimize our assortment a little bit.” When Mr. Kambeitz started at Best Buy nearly 15 years ago, he said desktops were “like the meat and potatoes of the computing business and laptops were hardly anything.”
“Now laptops are four to five times of our business compared to our desktop business,” Mr. Kambeitz said.
Not everyone expects the desktop computer to go the way of the dodo. Sarah Rotman Epps, a Forrester Research analyst, believes the rise of tablet devices could actually be a boon for desktop demand.
“When consumers who own tablets go to buy their next computer, they start to look at desktops as a great value for the processing power that you want and not see a need to pay extra for portability,” Ms. Epps says.
Based on a Forrester survey of 4,000 U.S. online consumers in June, she notes that buyers of an Apple iPad are twice as likely to also buy a desktop computer in the next year.
The gravity of the Intel warning, Ms. Epps argues, should not be exaggerated.
“I would be wary of making a conclusion just based on one quarter for one company, because there are a lot of reasons why that might happen,” she said, noting that other companies such as Hewlett Packard are actually “quite bullish” on their desktop PC sales.
jberkow@nationalpost.com
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