2-in-1s

Americans want better PCs for the dollar, HP and Dell outgrew Apple

Now that 2014 has come to a close, we can definitively say that the PC market has turned around in the US, growing 5% after years of decline.

Without much category competition, PC innovation grew stagnant over the decades. Then tablets came and easily beat PCs that catered to low cost, light computing needs. PC makers tried new things, but the technology wasn’t ready. New, experimental devices were either too heavy, too slow, too short on battery life or too expensive. Windows 8’s bad reputation certainly didn’t help.

2014 was a comeback because the entire PC value curve shifted upwards significantly. You got far better PCs for a given price, and customers — now used to great smartphones and tablets — demanded and expected quality. Only the top PC makers met that expectation.

Meanwhile, the tablet form factor saw little change so naturally, it made sense for customers to upgrade their old PCs for a dramatically better experience. The tablets they already had were just fine.

Now that we are on the brink of “good enough” convergence between PCs and tablets, I expect the hybrid form factor to grow even more as people seek to save money and do work on their tablets.

Last year, I consistently beat the gong for big display smartphones, and that was before the iPhone 6 and 6 Plus made the notion popular. This year I am beating the gong for hybrid devices.

Well, that was a longer lead-in than I expected to write. On with actual numbers from IDC.

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Battle lines in the ecosystem war will be drawn according to screen size

In yesterday’s post, we referenced the interview with Best Buy CEO Hubert Joly:

The tablets boomed and now are crashing. The volume has really gone down in the last several months. But I think the laptop has something of a revival because it’s becoming more versatile. So, with the two-in-ones, you have the opportunity to have both a tablet and laptop, and that’s appealing to students in particular. So you have an evolution. The boundaries are not as well defined as they used to be.

The line between tablet and laptop have indeed blurred. People are increasingly using tablets and laptops for both work and play. Going forward, I believe the most meaningful market segmentation is not one based on devices (phones, tablets, laptops, desktops), as we tend to do today, but by screen size (2-inches and below, 3- to 6-inches, 7- to 9-inches, 10- to 13-inches, 14- to 17-inches, and above).

From those lens, the positions of the three incumbents — Apple, Microsoft and Google — look different. Apple doesn’t seem as strong; Microsoft still has a chance; and Google just needs to extend its disruption upwards.

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The death of the PC is greatly exaggerated

There was an interesting interview recently on Re/code with Best Buy CEO, Hubert Joly.  Joly says all the right things about Best Buy and also had some insights on the PC and tablet market.  Highlights on the latter:

  • PCs are experiencing a revival, partly due to no more Windows XP support
  • Tablet sales are “crashing” and now a replacement market
  • Hybrid 2-in-1s are competitive with tablets
  • PC prices have declined a lot

My hypothesis based on the above is this — the tablet market is about light computing needs and those needs have been mostly addressed.  What do people use tablets for?  Browsing the Internet, reading books, watching movies, playing casual games and perhaps a bit of emailing.  An iPad 2 is sufficiently adequate for those requirements; there’s no pressing need to get an iPad Air.  We often talk about Chromebooks being good enough; so are the earliest iPads and most Android tablets.  Perhaps the only reason to upgrade is to play the latest 3D games but that is more niche than mass market.

Add it all up, and people with tablets are in no hurry to get another.  We saw explosive growth because tablets initially fulfilled an unmet need; but now that need is mostly met, growth is levelling off.

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