Watch Out PC Manufacturers: Tablets Are Forecasted to Overtake PCs

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The recent International Data Corporation (IDC) report has forecasted that by the year 2015 tablet shipments will outpace the entire PC market. The IDC is already forecasting negative growth for the PC markets this year making it the second consecutive year of negative growth. This negative growth can be attributed to the growing tablet market, which is expected by the IDC to grow by 58.7% in 2013. This means the tablet market will reach 229.3 million units sold, which is up from 144.5 million units sold last year. With the rapid growth of the tablet market, it is vital that PC manufacturers get into the tablet game before they are left behind in the dust.

Negative growth spells big trouble

The negative growth of the PC market spells big trouble for PC manufacturers such as Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ). Although both of these companies rely heavily on PC sales, they are changing with the times and trying to promote their own tablets in the market space. It has yet to be proven whether or not they can compete with some of the more popular brands of tablets.

In a recent response to weak tablet sales, Dell has slashed its Microsoft Windows RT tablet prices to $299.99. This is a $200 drop from its original price at $499. The IDC has reported that the Windows RT tablets have experienced low shipment numbers last quarter. The Windows RT tablets have only grabbed 0.4% of the overall tablet market. This spells trouble for Dell and their ability to compete in the growing tablet market.

Hewlett-Packard all but abandoned the tablet market in 2011 following dismal sales of their TouchPad tablet. After seeing the latest growth in the tablet market, Hewlett-Packard is trying to make a comeback with the Slate7, a seven-inch tablet based off of the Android operating system. The Slate7 tablet is entering an incredibly competitive market space with other seven-inch Android based tablets from Google, Amazon (NASDAQ: AMZN), and Barnes & Noble. It will be difficult for Hewlett-Packard to gain market share by competing directly with heavy hitters such as Google’s Android 7 and Amazon’s Kindle Fire. However, Hewlett-Packard is planning to release other tablet models in addition to the Slate7 in the very near future.

What does this mean as an investor?

As an investor, it is prudent to look at the manufacturers that have the most market share in the tablet market. Apple (NASDAQ: AAPL) currently has the number one selling tablet known as the iPad. Apple shipped 19.5 million iPads in the first quarter of 2013. The iPad currently has 48.2% market share of the overall tablet market. The popularity of the Apple iPad continues to dominate the tablet market.

A major change in the tablet market is the screen size of the devices. Many users felt that Apple’s first-generation iPad, which was 9.7 inches, was the right size for a tablet. However, now that the seven-inch Android-based tablets have been introduced into the market space, they have gained much more popularity. Apple has had to respond by creating the iPad Mini, which fits into the sub eight-inch tablet category. This market is gaining more popularity, and it is expected this year that 55 percent of tablet sales will be in the sub eight-inch category.

The Android-based tablets have increased their market share from 34.2% a year ago to 43.4% in the first quarter of 2013. Android-based tablets, such as Amazon’s Kindle Fire, are getting better and better with each new version.

Amazon is an aggressive competitor in the tablet market space. Some analysts believe that the Kindle’s evolution into a full-blown tablet is a way for the company to protect their e-reader market from other competitors. The company plans to make the Kindle Fire HD available in 170 different countries later this month. Amazon’s expansion into foreign markets will help them gain more market share in the tablet market.

Bottom line

Both Amazon and Apple are good companies to invest in if you are looking to cash in on the future growth of the tablet market. As an investor, sometimes it’s best to invest in the companies that are market leaders such as Apple and Amazon. Be very cautious when investing in companies such as Dell and Hewlett-Packard who appear to be chasing market trends and are late to market with their tablets.

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Ryan Sullivan has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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