Tablets the fastest selling mobile device

A recent article in the WSJ caught my eye. According to HIS iSuppli, PC shipments are projected to decline for the full year the first time in 11 years. Not a great sign for PC manufacturers and Windows owner Microsoft (MSFT). Analysts are expecting a slight pickup in sales once Windows 8 is released, I’m not so sure. Seems the only guys excited about Windows 8 are MSFT themselves this is not 1995 (Windows 95), if you haven’t noticed MSFT you have tablets to compete with!

As the chart above shows tablets have been the fastest ramping mobile device, a major reason in the decline of PC sales. PCs are still needed for work but future growth will be slow as tablets and smartphones take market share.

If this guy can’t pump up MSFT employees who can?

MSFT has totally missed the boat not only in operating systems for tablets but smartphones as well. This has been really unfortunate given MSFT was the first mover releasing a tablet with stylus (pen) back in 2002. According to Walter Isaacson’s book a MSFT employee crowed about their new tablet over dinner and annoyed Steve Jobs so much that Steve thought Apple (AAPL) should go ahead and produce their own better version!

Things have not gone too well for MSFT since Steve Ballmer became CEO. He is one of the more entertaining CEO’s, making one of my all time favourite CEO entrances, see video below.

 

MSFT is at risk of being left behind in the PC world with no material expsoure to the tablet and smartphone. Their key product to get back on track is Windows 8 which has been designed with tablets in mind.

Tablet growth ramping up, PC growth ramping down

On the 23rd of October AAPL will announce the new mini iPad just days before the Windows 8 launch. This is a major problem. People aren’t asking about Windows 8 they are more interested with the iPhone, iPad and Samsung Galaxy. Admittedly it is hard to build buzz with PC’s as they tend to be work related while tablets tend to be lumped into consumption and entertainment.

Even the Intel CEO does not believe Windows 8 will be ready telling Taiwanese staff that it is being released before its ready. Intel are one of MSFT’s biggest partners. PC makers banking on pent up demand from the upcoming release of Windows 8 will likely be kept waiting. 

Tablet growth off the charts

Tablets have been a major reason for the slowdown in PC sales. As we pointed out in an earlier blog Tim Cook has mentioned "through the last quarter, which is just two years after we shipped the initial iPad, we've sold 67m. And to put that in some context, it took us 24 years to sell that many Macs, and five years for that many iPods and over three years for that many iPhones."

Tablets sell fast, given their price and convenience it is more likely for a family to have multiple tablets than multiple desktops. It is no longer a stretch to say that tablet market sales will eventually overtake the PC market. As investors we are focused on companies that benefit from growth in tablets (AAPL) and will stay away from companies exposed to PC sales (MSFT).

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Disclosure: Decisive is long AAPL; has no position in MSFT

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