How PC makers are fighting the mobile revolution

June 4, 2013: 6:45 AM ET

Embattled computer manufacturers are making new machines they hope can keep pace with phones and tablets.

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Down, but not out: The PC market may be shrinking, but products like Lenovo's 13-inch IdeaPad Yoga, which converts into a tablet, prove manufacturers can still innovate. Credit: Lenovo

FORTUNE -- For PC makers, Charles Darwin's Theory of Evolution holds true now more than ever: adapt to their rapidly-evolving environment or perish.

"The PC industry is like that scene out of Jurassic Park, where the little kid asks the professor, 'What happened to all the dinosaurs?' and he responds, 'We see them everyday: They're birds,'" explains J.P. Gownder, Vice President for Forrester Research (FORR).

Indeed, it's no secret the PC industry is fast evolving, and not entirely by choice. Shipments of PCs dropped 14% worldwide last quarter, according to the global market intelligence firm IDC, marking the fourth consecutive quarter of year-over-year decline. And PC shipments are expected to fall further, as much as 8% through 2013.

MORE: 51 coolest gadgets of 2012

Much of that has to do with the popularity of mobile devices like tablets. IDC projects global shipments of tablets will pass PCs by 2015, with 332.4 million vs. 322.7 million PCs. For more casual computer users, and even some business professionals, the upside to having a tablet is obvious: Why lug around a laptop, when they can tote something lighter, thinner, and often cheaper around with many of the same features?

Traditional PCs have also reached a point where that $400 Dell (DELL) laptop from Best Buy (BBY) can handle most daily tasks just fine and will be able to do so for several years to come. That wasn't always the case. "It used to be every time you upgraded the operating system on the Windows side, you needed a more powerful chip and a more powerful computer with more memory with more horsepower to run that operating system," recalls Gownder.

But starting with Microsoft's (MSFT) Windows 7, which cut down on the bloat of Windows Vista, the operating system required fewer resources to run on many contemporary PCs. That meant more users, consumers and businesses alike, could upgrade the operating system on their existing machines without upgrading the parts on their computer or buying a new one.

As grim as their prospects might seem however, PCs aren't going anywhere. There remain tasks tablets and smartphones simply can't do, or at least do well. And companies like Lenovo have proven there's still life yet in the decades-old industry. As a recent Fortune feature revealed, Lenovo's investments in PC R&D and factories have helped the Chinese tech giant triple in size since it bought IBM's PC division in 2005, to $33 billion-plus in sales. Its outré designs include the widely-praised IdeaPad Yoga laptops, which convert from notebooks into Windows 8 tablets.

At just over 5 lbs., Dell's XPS 18 all-in-one desktop is light enough for users to easily move around the home. Credit: Dell

At just over 5 lbs., Dell's XPS 18 all-in-one desktop is light enough for users to easily move around the home. Credit: Dell

The changing market is forcing other PC makers to also get more creative, leading to what Gownder calls the most unprecedented period of experimentation in the history of computing. To wit, Dell launched its XPS 18 earlier this year, a five-pound all-in-one desktop with an 18.4-inch touch screen meant for users to move around the home. Likewise, Taiwan-based Acer will reportedly take a different tack when it announces a new all-in-one desktop next week shunning Microsoft and Intel (INTC), and running Google's (GOOG) Android operating system with a Texas Instruments (TXN) chip.

Products like these are what make analysts like Gownder and Gartner Research analyst Mikako Kitagawa optimistic the PC will stick around even if the number of "installed" PCs declines, which Gartner predicts will start happening next year in the U.S., falling 4% to 180 million units, and globally in 2015. In the past, a household with three family members might have two or three computers, but that scenario won't happen any more, predicts Kitagawa. They'll rely on tablets for most things, and one PC shared among them to do the heavy lifting.

As computers further evolve out of necessity, they will yield even more surprising form factors, something the industry is already seeing with Google Glass and even tangentially, "embedded computing devices," devices with computing activity that don't require a lot of user input but track various aspects of users' day-to-day: the Nest home thermostat being one contemporary example. Says Gownder: "In this case, the velociraptor has turned into a finch."

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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