Inflection Point: PC Era May Shapeshift To Tablets

Monitoring the financial announcements from big companies in the PC sector resembles watching a jalopy falling apart. The evidence appears to be piling up that the PC era is morphing into a mobile and tablet-based era.

Consider: Shares of giants like Intel Corp. (Nasdaq: INTC), the No. 1 chipmaker, and Hewlett-Packard Co., the No. 1 PC maker, have set new 52-week lows. Now, Advanced Micro Devices (NYSE: AMD), Intel's rival and the second source for PC makers, warns that third-quarter results won't match estimates.

Shares of AMD, of Sunnyvale, Calif., tumbled more than 7 percent after hours on Thursday and set a new 52-week low Friday. Its diminished market value even now is only $1.94 billion.

This month, Microsoft Corp. (Nasdaq: MSFT), the No. 1 software developer, is scheduled to ship the new Windows 8 OS. A year ago, it was supposed to be a shot in the arm for HP and Dell (Nasdaq: DELL), the No. 2 U.S. PC maker, as well as all their Asian rivals.

It doesn't look this way anymore. Indeed, data published just ahead of the earnings reports by market specialist IDC said global PC shipments slid 8.6 percent in the third quarter. Full-year progress will hinge upon a blowout response to Windows 8, as well as new Ultrabook laptops powered by new Intel Atom chips, it said.

IDC also had another shock for HP, of Palo Alto, Calif., whose CEO said just last week the company will require another four years to get into shape: It's only narrowly ahead of China's Lenovo Group (Pink: LNVGY) in global PC sales.

HP sold only 102,000 more units than Lenovo in the third quarter, IDC reported. But Lenovo's sales jumped more than 10 percent while HP's PC sales dropped more than 16 percent.

One bright note may be that Lenovo plans to build a new factory in North Carolina. Until 2005, Lenovo was the PC unit of International Business Machines Corp. (NYSE: IBM), the No. 2 computer company, of Armonk, N.Y.

Meanwhile, investors await the fourth-quarter and fiscal-year report of Apple Inc. (Nasdaq: AAPL), the world's most valuable technology company, on Oct. 25. Most likely, it will announce record sales of the iPad, a product that wasn't even introduced until January 2010.

Apple sold 17 million iPads in its last quarter, 84 percent more than a year earlier. Very likely, the figure will be far higher this quarter.

Sales of other tablets are burgeoning. Amazon.com (Nasdaq: AMZN) may announce how many Kindle Fires it's sold in the past year. Lenovo, which sells the ThinkPad tablet, may announce some figures, too. Microsoft will also start selling its Surface tablet this quarter; part of Windows 8's promise is that it deploys “touch” and “swipe” functions first encountered by iPad users in the Apple iOS.

In the 1980s, there were scores of PC companies: Kaypro, Eagle, Sinclair, Commodore, Atari and Radio Shack, as well as entrants from the big computer makers like NCR Corp. (NYSE: NCR), AT&T Inc. (NYSE: T), Unisys Corp. (NYSE: UIS), Digital Equipment Corp., Compaq Computer Corp., Wang Laboratories and more.

Now, Apple and the well-known brands are the giants. The others are mostly defunct.

Apple, of Cupertino, Calif., may have recognized early, under Steve Jobs, that times were changing. That's why it introduced the iPhone in 2007 and the iPad in 2010, following the success of the iPod, which came out in 2001.

Others, notably Japan's Sony Corp. (NYSE: SNE), first shipped the Walkman in 1979 and made its first pile with transistor radios. It has a tablet now but is nowhere near Apple in the market.

Looking back in 2022, it could be that consumers and investors will regard the third quarter of 2012 as the true inflection point, when the industry started shifting from fixed to completely mobile.

For investors, the good thing is that some of the leaders, especially Apple, Intel, IBM, AT&T and HP, know this. Whether they will survive profitably then is a question of the decisions their managements make now.

Unfortunately for Apple, its shares Thursday moved back to “correction” mode as they closed at $628.10, down $12.81, or nearly 11 percent below their record high of $705.07 set only on Sept. 21. It's the second time this week they've corrected.

Chances are Apple shares will rally now, or after earnings are announced, though, which could set the stage for further upward moves. On Friday, they rose $1.61 to $629.71. That's just barely above a 10-percent decline.