Old PC isn't what it used to be

The smarter tech companies have already moved away from the personal computer.

By Jim Cramer Jan 12, 2012 10:37AM

Image: Old computer equipment © Image Source/Getty ImagesWhat would have happened if Microsoft (MSFT) had said something positive about personal computers this week instead of something negative? How much would the stock have moved? How much would the group have moved?


Maybe the issue, though, is that there isn't much of a group anymore. Remember the PC makers? How about the PC component makers? They've all kind of realized this day would come, when the personal computer wouldn't have growth, and they have all moved on, including Microsoft.


Think about it: Microsoft has made a huge bet on mobile phones with Nokia (NOK). It has made a colossal bet on games with the Xbox. It has made a potentially game-changing wager on video with Skype. Sure, it is hostage to a certain degree to personal computers, but this stock isn't down 10% like it would have been even five years ago, because CEO Steve Ballmer saw this day coming. Give him that.


Same with Intel (INTC). Tuesday Intel came out with one of the most significant design wins in the company's history, a deal with Motorola Mobility (MMI) to be in Android. Sure, it isn't in the Apple (AAPL) iPhone, and there will be many other chips in the mix, ones from ARM Holdings (ARMH), which is in the iPhone, along with, of course, chips from Qualcomm (QCOM), which is still the de facto cell-phone chip player.


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But Intel saw the writing on the wall, too.


You may have seen the recent interview with just-retired IBM (IBM) CEO Sam Palmisano where he talked about selling its personal computer business to the Chinese PC maker Lenovo. He said the idea was much derided at the time, but clearly IBM saw this slowdown sea-change first.


But if you have been listening to Michael Dell lately, he has moved Dell (DELL) aggressively away from low-margined personal computer selling into the higher-margined software and solutions business. It hasn't paid off yet, but I think it will when things get better in Europe.


Even Micron (MU), a company with dumb chips that always had little gross margin leverage if it had any at all, has moved aggressively into flash, which has been a big winner for it.


The lone holdout, the company most reliant on personal computers of the major hardware companies, is Hewlett-Packard (HPQ), and even that tone-deaf, customer-blind company was trying to ditch personal computers during the waning days of the previous CEO's tenure.


That's why the tech sector wasn't pole-axed by the Microsoft news. It doesn't mean there aren't huge problems with many of these companies, some of which could still report some pretty nasty quarters, particularly those in the enterprise business or in the telecommunications business.


But the days when a negative personal computer comment from Microsoft can take the whole tech group down are now over, and it's time for those who regard personal computers as a growth vehicle to wake up and smell the coffee. It's just not where the action is anymore, and even the companies that pioneered the device and made it great at last know better.


(Microsoft owns and publishes Top Stocks, and MSN Money site.)



Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL and IBM.



16Comments
Jan 12, 2012 12:20PM
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Lap tops, cell phones and page readers are handy when you are on the move .. but when it comes to home and office work place .. desk top computers will win a sizable slice of the pie.
Jan 12, 2012 11:58AM
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The old box on the desk isn't going anywhere.    Sure it's not were the growth is but to say all of them will be replaced tomorrow by tablets or smart phones is a dumb outlook.      PC's are cheap, easy to work on and take the abuse of the users well.        
Jan 12, 2012 1:18PM
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Smile Yep, those old PC's only sold 90 million last quarter because consumers are buying smart phones and tablets which are small, mobile PCs. The PC's not dead, it's mobile and Windows 8 will prove that to many people. Did you see that Nokia 4.2" smart phone? It's really a Windows 8 PC that works with everything in the workplace and on your home server, XBox. Microsoft's announcing motion, voice control Kinect technology for all PCs next month. Over 66% of US population has PCs, 220 million, and only 5% of China's 1.3 billion have them.  Jim, don't hold your breath, the PC's alive and well.
Jan 12, 2012 11:54AM
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Gosh, I dunno, every time I walk into a business or government office, there they are, those dinosaurs of the computer world, PC's, on a network no doubt. Individuals may be going this route, but I don't see businesses giving laptops to their employees unless they have a bunch of road warriors...
Jan 12, 2012 1:59PM
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why should cramer quit when he gets a salary plus a platform to rip people off?
Jan 12, 2012 2:14PM
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cramer has to be a ripoff because nobody could possibly pick as bad as he does

LOOK AT HIS PAST PICKS......DO NOT TAKE MY WORD FOR IT

Jan 12, 2012 1:15PM
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since he said avoid banks with bac near 5 the financials have soared with bac hitting 7 today

this guy is so wrong so often that he is obviously pumping and dumping..........

for MSN to allow his crap is criminal

Jan 12, 2012 1:49PM
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Regurgitated nonsense. Intel has no reason to view any writing on the wall, nor have they. None of these companies have huge problems that you implied in this gibberish.

Cramer you are a blithering idiot. Quit your job and move to Bikini Atoll.
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Still can't beat the old desktop when it comes to getting things done, and playing music on anything else is a big dropoff in sound quality. See pretty powerful desktop bundles for $400 these days, hard to beat.
Jan 12, 2012 12:50PM
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while not a growth vehicle, PCs are ubiquitous in our world and everyone has one. they break and are replaced. what's left is grabbing a share of that constant market, like Charmin toilet paper or Reynolds wrap aluminum or Coke..

Jan 12, 2012 5:10PM
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I will give up my PC when they pry my cold, dead fingers off the keyboard.  I have two laptops and a desktop PC and a tablet and the only complaint I have is that I can't talk to them like they do on Star Trek and have them do stuff for me without all the typing.  I know that is coming and some high end machines already do that.  Oh, well, I can dream!  I really think Mr. Cramer is a little bit premature in his predictions.  Nothing is what it once was and PCs are no exception  but there are things that a PC can do that a tablet or smartphone can't....yet.  Once harddrives are all flash driven that will be a game changer.  I remember when digital cameras first came out and the quality was poor and there were a bunch of other issues but that has changed in a big way.  So it will be with PCs.  My first machine had 215 MB of ram and my latest has 6GB.  Now that's a major improvement!
Jan 12, 2012 5:16PM
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go under feedback and ask MSN  to remove this jerk
Jan 12, 2012 6:41PM
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Might not need a desktop pc but sure need the desktop monitor.   Anyone trying to do spreadsheets or research or just about any other productive office work, can't manage with a laptop alone.      
Jan 12, 2012 2:31PM
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This morning I went on Microsoft and was askes if I would take a survey. Entire survey had to do with the entities he mentions in the first part of the story tablets androids and games nothing about the pc. So I walk away when I have to pay 500 for a tablet they can make for 25bucks if that.
Jan 13, 2012 12:59PM
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WOW! Allow me to rant for a few minutes. This is good stuff!

It is an interesting take on the PC market by Microsoft (MSN Money), and even slyly trying to show all stocks down. LOL 

This article is wrong, in 2010 - Ballmer said "People will be using PCs in greater, and greater numbers in years to come". 

He felt they would "shift in form factor". However, this logic is flawed, as he felt the iPad is merely shifting form factor, but not interface. This is why Metro is so late to the game, and is still a mix and mash of PC and tablet apps and interfaces. It is really a hybrid, in between OS.

Stock Performance

Well, the real number are: 
  • Microsoft 5-year  -26.5% is down from a 5-year high of almost $38/share in 2007 to its current price of $27.90
  • Google 5-year  -12.8% is down from a 5-year high in 2007 of $714/share to its current price of $622
  • While Apple 5-year  +110.5%-400% is up to $419 a share that in 2007 peaked to only $199 in December (Jan 07 was $84)


Microsoft is in trouble!

I fail to see how Ballmer foresaw "this day would come" (regarding a downturn of the PC), as he failed to grow his company and made the statement of "greater and greater" (mentioned above). They are down marketshare in PCs, phones and software. For some time, Ballmer's response to market competition had been to tout PC market share of Windows. Even saying how Win7 is selling better than XP.

Microsoft has a really good product in its Exchange and online offerings, but its core of desktop OS and mobile OS is winding down, much in the way BlackBerry has over the last few years. Microsoft isn't even a player in mobile. They failed with music (Zune), they failed in mobile (Win7 Mobile), and the lead they had in the browsers and desktop is in rapid decline. 

What is interesting in all of this article, is that the PC (Desktop/Laptop) market is down only 5%, but Apple has grown marketshare by 20% in one year.

HP's CEO is even saying that Apple (#3) will take number one this year (2012).


Apple leads, Google follows, Microsoft withers

Apple has over 80% of the profits for mobile phones, and Google leads in market share. This leaves Microsoft out of the game entirely. The tablet field is looking to play out the same way, as Apple (and to an extent, Google) leverages the existing mobile platform on the tablet arena. Essentially, Apple is taking the next fight to their home turf (mobile platform) and Windows is attempting to kluge Windows 7 (their home turf, in decline) into a tablet interface with Metro (due sometime next year, 2013).


A very interesting turn of events the last 5-years...

Ballmer bashes iPhone, "We are selling millions and millions of phones a year, Apple is selling zero phones a year".  Funny how that flipped over. (Also, Microsoft only sells the OS, and never the hardware). Rather than copy Apple, he decides to copy Blackberry (The losing horse)
Jan 12, 2012 7:49PM
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I have never bought a desktop PC from a manufacture like dell. Build my on PCs way more reliable and cheaper. You get a better value from a custom built PC than an OEM. 
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