IPad: The PC Killer?


After he unveiled the iPad at a San Francisco conference center in early 2010, the late Steve Jobs spent a few minutes asking people holding the device for the first time what they thought of it. A reporter suggested it might make consumers forget why they needed a laptop computer. Jobs shrugged his shoulders and said, coyly, “We’ll see.” Jobs was a master not just at anticipating paradigm shifts but creating them. If tablets eventually did eclipse the laptop and desktop businesses, Jobs was determined that Apple would reap the windfall.

That day has arrived. On March 19, 2012 the same day Jobs’s successor, Tim Cook, declared Apple would disburse some of its $98 billion cash stockpile as dividends, the company announced it had sold 3 million new iPads in their first weekend of release. The product is expected to bring in $38 billion in sales in 2012, according to Piper Jaffray (PJC) analyst Gene Munster. In the fourth quarter of 2011, Apple sold 15.4 million iPads—more than the number of PCs sold by Hewlett-Packard (HPQ), the world’s No. 1 maker of Wintel PCs. If you consider an iPad a PC substitute—and many consumers certainly do—then Apple, which also produces the iMac and MacBook, is now the biggest PC maker in the world.

The most astonishing part of the iPad era is how completely Apple still controls it. There were plenty of smartphones on the market when the iPhone first appeared in 2007, and it quickly drew new competitors, most notably Android devices. The iPad’s trajectory has been different. Despite loads of new tablets from Samsung (005930), HTC (2498), Motorola Mobility (MMI), HP, Dell (DELL), and others, the iPad still holds 66 percent of the market, according to Gartner (IT). “The whole industry has been going nuts, trying to figure out how to compete with Apple,” says Robert Brunner, a former Apple design chief who now runs design firm Ammunition Group. “You can see the fear in their eyes.”

Apple’s dominance of the tablet space certainly represents a blow to the collective egos of PC manufacturers. But the iPad, by combining technical ingenuity with mass-market appeal, is doing more than simply eroding the profits of some of the world’s most successful computer companies.

The idea of tablet computing has been around for decades. Microsoft (MSFT) made a big push in 2000. Pre-iPad, the things didn’t work terribly well, and no one was really sure whether a mass audience would use them. The iPad has shown that there is in fact a gigantic, succulent market for these devices. Yet the finest computing minds outside Cupertino have failed to come up with a true rival. What’s so hard about tablets?