Maybe HP's PC Market Is Soft Because Tablets Are Beating It to a Pulp

Published on February 24, 2011
by John Paczkowski

Hewlett-Packard does a number of things well. But as CEO Leo Apotheker noted Wednesday during the company’s earnings call, it has “a few isolated areas that need improvement.” Top among them at this point in time, the company’s consumer PC which saw sales fall 12 percent year-over-year. Apotheker blamed the decline on the the economy and “continued softness” in the consumer PC market. But there may be another explanation as well–Apple.

Certainly, there was no sign of consumer market softness in the record revenues Apple reported last month or in its sales numbers, which include 7.33 million iPads. And some analysts have begun to wonder if that might be part of HP’s problem. “HP is pointing to weakness in consumer segment, when the real problem is that its notebooks are being cannibalized* by tablets, where Apple is in a premier position,” Capstone Investments analyst Shebly Seyrafi observed in a note to clients today. “We believe both factors are at play.”

Over at Deutsche Bank, Chris Whitmore said essentially the same thing, but went a step further, equating weak consumer PC demand directly with iPad cannibalization. “We believe iPad cannibalization of consumer PCs is a long-term trend and a meaningful contributor to the revenue shortfall,” he wrote.

If that’s the case, HP best get its webOS TouchPad to market, and soon. Come this time next week the consumer market will be drooling over the next iteration of the iPad.

*Yes, yes, cannibalization is actually eating one of your own and in this case, we’re talking about tablets eating PCs, but that’s the term the analysts are using, so just let it slide.

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