We're taking the tablets and the PC is dead

06 May 2010

The personal computer is dead; long live the very personal computer.

The numbers say so. Jean-Louis Gassée, a former Apple exec and now a Silicon Valley VC partner, crunches them in his blog.

He points out that HP, the world’s biggest PC firm, sold $10 billion in “personal systems” in its last quarter and made $500 million – a 5% operating profit.

In Apple’s latest quarter, smartphones accounted for 40% of sales and was largely responsible for the $3 billion profit on a 58% margin.

“Apple makes $3b of profit from its iPhone while HP takes in a mere $500m on its PCs—that’s a 6x difference. The Center of Money has shifted,” says Gassée.

HP’s low margins illustrate the problems of the PC sector.

“The personal computer has reached the S-Curve’s shoulder while very personal computers are still at the S-Curve’s knee, poised for the type of growth the PC has enjoyed over the past 30 years.”

Another Valley blogger, Om Malik on GigaOm, uses Gassée’s data to point up Intel’s problems. It’s addicted to the fat PC margins and, like its longtime partner Microsoft, is having trouble creating a new hit.

Intel yesterday announced its new Atom series chip, aimed at the smartphone and tablet markets.

As we’ve seen, those segments are where the money is, but the news did nothing for Intel’s stock.

“Despite its efforts to launch new chips or dabble in likely-to-fail OS efforts such as its joint venture with Nokia, the Mobilin, Intel resembles an elephant on top of quicksand,” says Malik.

Whereas in the PC world Intel has had one weak rival, AMD, to toy with, it faces strong, cashed-up competitors in the smartphone segment like Qualcomm, ARM, Nvidia and Texas Instruments.

Intel is locked out of the Apple ecosystem and will find it hard to push its way into the Qualcomm-dominated Android world.

The first-gen Atom processors helped light the netbook boom. But don’t expect to find them powering a big-selling smartphone any time soon.

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