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The PC and tech industry are undergoing a fundamental transformation that will leave it vastly smaller in the coming years. The game-changer is Apple with its iPad, iCloud, and iPhone offerings.
To understand what is happening to the PC and tech industry, look no further than the mobile industry. In the last three years, $200 billion in market capitalization has been lost from Nokia, RIM, Motorola, and Palm. Where did it go? About $165 billion went to Apple due to the iPhone. The remaining $35 billion vanished into thin air due to economies and efficiencies of one company producing a phone versus four companies producing many different phones. When you break it down, it means less components, less suppliers, less intermediates, and less people. Hence, why Nokia and RIMM are laying off workers and I am sure this scenario will be repeated across the entire mobile ecosystem that supported RIMM, Nokia, Motorola & Palm.
The exact same thing is happening to the PC and tech industry. With the proliferation of the iPad, the entire PC industry is being disrupted. More iPads mean fewer PCs which means less Dell, HP, and Lenovo, which in turn means less Microsoft, which mean less Intel, which means less third-party software like Adobe, less antivirus like McAfee, less harddrives, which means less Seagate, Hitachi and others.
When companies sell less, they also need fewer staff. Hence, it also means less operational spending on office space, desks, phones, switches, routers, paper, coffee, etc.
When companies sell less, their product lines also shrink. That means less web pages, hence, less need for SEO and SEM services which means less money spent on online advertising, Google, Yahoo, and Bing. It has also been shown that iPad users search less, which is more bad news for Google, Yahoo, and Bing.
The iPad also comes with most of the applications the average user uses and hundreds of thousands more are available through the Apple App Store. This is bad for Microsoft Word, Excel, Powerpoint and hundreds of similar applications. The bottom line is hundreds of billions in the PC ecosystem will be transferred to Apple much like what happened in the mobile industry.
The iPad is now making inroads into the enterprise and the same will unfold there but at a slower pace. With the rollout of iCloud, it ultimately means less storage and backup products will be needed by enterprises (more dollars) and more by datacenters (fewer dollars), which is bad for EMC, NetApp, and HP. It also means less virtualization software, routing and switching will be needed by enterprises and more by data centers, which is bad for VMWare, Cisco, and Brocade to name a few.
It is already happening. Look at Adobe – its Flash and PDF software are blocked on the iPad, which is the fastest growing device in the market. The iPad will eventually replace a good portion of today’s PCs. In the meantime, Adobe is using its cash to buy businesses like Omniture, which has no correlation or synergies to its core business in the hopes that it somehow pans out to be a blockbuster business someday. It rarely does. Adobe’s stock is already starting to look like Nokia and RIMM.
Many companies in the PC and tech industry are going to end up like their mobile counterparts – Nokia, RIMM, Palm and Motorola. They will loose market share to Apple, their margins will shrink, their product offerings will thin, and ultimately, they will sell less and need less people. Shareholders will see their fortunes evaporate just like the shareholders of Nokia, RIMM, Palm, and Motorola. This will be followed by mass layoffs. To make ends meet, many laidoff workers will have to sell their homes at depressed prices, further suppressing home prices in Silicon Valley and other tech hot spots.
Many called the iPhone a fad, including the CEOs of Nokia, RIMM, and Palm. Today, these companies are barely surviving. Their employees are in disbelief as everything they spent their lives building has been reduced to rubble in a span of three years and still continues to crumble. The iPad is doing the same thing. It is fundamentally altering the technology stack and its all downhill for the thousands of companies invested in the old PC and tech industry.
Disclosure: I am long Apple.
Channels: Adobe, Apple, cisco, intel, Microsoft, nokia, rimm
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If only Google had a culture that permitted marketing people to examine the ramifications of product decisions the engineers want to make, then it could have saved this $6.1 billion and not been subject to further licensing fees.
Comment by random observer — August 3, 2011 @ 11:04 AM
Hogwash! This is an intellectually lazy article. Look the iPad has its uses but The PC is an industry standard that has evolved over 30 years. No chance in hell the users are going to give up something they have used forever in favor of a brand new gadget. Ask Investment Bankers whether they would give up their desktops/laptops running Microsoft Excel and Powerpoint and switch over to iPad. Ask Bank tellers and other office managers whether they unlearn their PC hotkeys and start learning to do stuff on the iPad. To make a blanket statement that the entire PC industry would be disrupted without really quantifying with data from credible sources is sheer lunacy. Please do some due diligence before you write up stuff like this.
Comment by GrizzlyBear — August 3, 2011 @ 11:17 AM
I would encourage you to read the annual and quarterly reports from Apple. Then read Nokia & RIM all the way back to 2003. They basically sounded like you. They said it was impossible. Ask their laid off employees today if it was impossible. iPads are already a bigger line item than the iPhones http://www.webguild.org/20110720/apple-has-anothe.... Wake up!
Comment by Daya Baran — August 3, 2011 @ 12:44 PM
Speaking of iPad making inroads into the enterprise (paragraph 7), have you seen this?
http://www.oracle.com/us/corporate/press/427133
Comment by GringoViejo — August 3, 2011 @ 12:48 PM
@grizzlybear ask Adobe employees. They see the writing on the wall. Ha ha haa ha
Comment by hip hop hippy hop — August 3, 2011 @ 12:57 PM
Bit different though. iPhone competed directly with Nokia and RIM's core offering whereas iPad is more of a complement to PCs. Not saying that PCs will not substantially decline, but many PC functions will not directly translate to the semi-mobile world of iPad. I think a lot of the PC market will wind up going the route of netbooks / netstations a la Chrome OS as opposed to tablet computing which is more or less iPad right now.
Comment by Adam — August 3, 2011 @ 1:14 PM
Are you sure that $35B disappeared into thin air? Did you look at Apple's supply chain in Asia. Foxconn and Wintek and Sharp? could well have combined appreciations by more than that.
Comment by applepie — August 3, 2011 @ 2:04 PM
The day I can create–not just consume, but create–everything on an iPad that I can on a PC, I will buy an iPad.
Comment by John Boykin — August 3, 2011 @ 9:43 PM
iPad, iPhone,….,….? What do the hi-tech engineers think when they look at Dad's out-of-date hardcopy encyclopedia, the disappearing newspaper, publishing and other industries? After today's market crash, just look- retirement savings are down, home prices are down, unemployment and foreclosures are high. Silicon Valley is not bad, but mid America -including central California is particularly hard hit. Whatever software engineers couldn't kill – imports from china has killed (shut down Walmart, change Sam Walton's name to sum ting wong!!)
Comment by vkmo — August 4, 2011 @ 6:13 PM
Interesting but extreme prognosis. Wonder if this Orwellian scenario has any chance of panning out in reality. Can a single company like Apple capture most of tech value chain and keep it – I do think that is possible at all.
Adobe's Flash is being upended by HTML5, not iPhone or iPad.
Storage Industry is going through a see change due to SSD's, not iPad. If anything, we will use more and more storage, not less. because of transition to cloud (iCloud included)
Apple's iPhone is far behind Android in market share. Apple is holding onto the its lead in iPad through litigation – how long do you think that will last ?
The networking industry has matured and it can supply more bandwidth then any us of really need. Move to cloud will certainly be driving more demand for networking.
Comment by s.g. — August 18, 2011 @ 11:24 AM
This is a mind-blowing post.Written nicely apart from nicely organized.
Comment by Birmingham — September 14, 2011 @ 8:22 AM
This is sobering, and it does have the ring of truth. But another way to look at it is the iPad is just another (great) gadget in a continuing procession of stand-alone devices that take advantage of the plummeting cost components such as displays, processors, memory etc. In that context, the iPad is less of a PC replacement and more often an addition to the well-equipped executive or consumer.
Comment by Chad Hoke — December 20, 2011 @ 5:22 PM