The end of the desktop PC (seriously)

chart_smartphones_vs_pcs_v2.top.gif By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- Video may have killed the radio star, but the PC and a host of other seemingly outdated consumer gadgets live on in the face of many attempts to replace them.

Sales of smartphones and tablets are on the rise, pushed by companies like Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500) that say the newer devices can displace computers, but PC sales also keep on booming. Intel (INTC, Fortune 500) reported last week that its second quarter was its best ever, boosted by strong PC sales. And analyst group Gartner predicts computer sales will rise 22% this year.

It's not just PCs. Digital cameras, laptops and MP3 players have become nearly ubiquitous tools for even the Luddites among us, even though smartphones can perform many of the same tasks that their single-function brethren can.

But a confluence of events among device manufacturers and service providers suggests that the end for the desktop computer and other "has-been" devices really is on the horizon. Unconnected gadgets are finally starting to lose their luster and are beginning to be replaced by more multi-functional, connected devices.

"We've been talking about this for 10 years, but what's new is that component costs have come down, the ecosystem of services has become more mature, and these devices are supporting a wider variety of content now than ever before," said Susan Kevorkian, mobile media and entertainment program director at IDC.

In other words, new gadgets have become cheaper, more functional and offer more bang for the buck than devices like the PC, MP3 player and netbook. High function but low-end smartphones are now available on low-cost wireless carriers like MetroPCS (PCS), Sprint's (S, Fortune 500) Boost Mobile and Leap Wireless' (LEAP) Cricket, and devices like e-readers have begun price wars.

Most importantly, newer gadgets offer more than just the devices' primary functions themselves; many have a multitude of services that come with them. Tablets and e-readers have 3G connectivity, the ability to download a host of apps and access to GPS services, which most music players and laptops can't handle. Some services like Netflix (NFLX) and Amazon's (AMZN, Fortune 500) Kindle apps allow users to begin watching a movie or reading a book on one device and finish it on another device.

"Consumers want content anywhere, on the go, and a seamless experience across multiple devices," said Dmitriy Molchanov, consumer electronics analyst at Yankee Group. "It's not just about the device anymore but the service that comes with the gadget."

As a result, smartphones sales rose nearly 57% in the first quarter over the same period last year, according to IDC. And Apple has already sold 3 million iPads since April. Forrester Research expects tablet computer sales to overtake desktop PC sales in the United States by 2013. The installed base of smart phones worldwide will also overtake all PCs by 2013, according to Gartner.

What's in, what's out

Yankee Group recently published a study analyzing gadgets for their ability to connect to tasks that consumers crave like social networks, applications and multimedia content. The analysts then examined those devices' potential to connect to services like GPS, subscription services and wireless networks.

The study found that smartphones, tablet computers, e-book readers, connected cars and connected televisions had the highest potential to be "transformative" in those important areas, and would become the next ubiquitous and "game changing" devices.

On the other hand, portable navigation devices, MP3 players, digital cameras and desktop PCs had largely already made their mark, and will soon be replaced by the newer devices, Yankee Group predicts.

Some are already getting replaced. Half of consumers have watched video on their MP3 players in their homes, according to a Yankee Group study. Google, for instance, said it experienced a huge spike in mobile searches during this year's Super Bowl, as searchers opted to go online on their phones rather than laptops or computers.

Still, there will continue to be a market for some "outdated" devices. Smartphone cameras still don't take photos as well as most digital cameras, and word processing is much easier and richer on a PC than on an iPad. Many are hesitant to put their entire photo album exclusively online without some backup on a PC's hard drive, said Van Baker, an analyst at Gartner.

And connected gadgets with services may be great, but if more carriers stop offering unlimited data plans -- like AT&T (T, Fortune 500) recently did -- using connected devices for streaming Netflix movies, browsing the Internet and downloading apps may soon become an expensive enterprise.

"Are these devices going to go away rapidly? No," said Van Baker. "There will always be some who want a phone just to talk on." To top of page

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