There's trouble brewing in the PC world. This trouble is mostly seen as a function of the mobile revolution, where the increasing power and mobility of smartphones and tablets slowly displaces desktop and laptop PCs as an access mode to the internet.
In a recent report titled "2012 Internet Trends Year-End Update.", Mary Meeker from Kleiner Perkins Caulfield and Byers pushes this thesis hard, showing how Apple's (AAPL) iOS and Google's (GOOG) Android have been chipping away at the Wintel monolith.
But there might be something else at work as well.
That something else is the fact that desktops and laptops simply got "good enough". Certainly good enough for the most common business apps such as Word, Excel, Powerpoint and e-mail, but also good enough for all the web surfing most people do. After all, if that weren't so, we wouldn't be seeing underpowered smartphones and tablets filling those functions as well.
Someone familiar with a PC powered by an Intel (INTC) quad-core chip such as the Q6600, or a dual-core chip such as the E2200 knows that these PCs are still completely usable for the mundane tasks of today. The problem here is that both these chips first came to market in … 2007 (Q6600 was launched in Q1 2007, E2200 in Q4 2007). And that sums it up, these chips, the heart of the PC, have gotten good enough for the majority of tasks already 5 years ago. So it's no surprise that presently, the rate at which PCs get substituted by new PCs is dropping fast, even without any substitution by mobile devices.
Sure, there are niche applications which demand increasing computing power even now. Gaming would be at the forefront of those. Oddly enough, gaming has seen the consoles stagnate for many years as well, which might actually have helped PC gaming. The Xbox 360 was launched back in 2005, so it is already 7 years old. At this point it is expected that Microsoft (MSFT) will launch a new Xbox during 2013. Since the PCs have probably gained some demand from the gaming console's technical stagnation, it's likely that the renewing of the console's hardware cycle will also put some more pressure into gaming PC demand.
Anyway, what stands out here is that it's not just the mobile revolution that's eating away at PC demand. Its own technical evolution seems as much of a culprit as anything else, with old devices being perfectly able to perform the most ordinary, mundane, tasks perfectly well. This continues to bode badly for Microsoft and Intel, as long as no new killer app with broad appeal shows up which demands more powerful hardware.
An extension of the problem
For now this phenomenon is hitting mostly PC-related companies. However, at some point consumers might also reduce the pace at which they replace their smartphones. At some point the screen will be good enough, the speed will be good enough, the battery life will satisfy, and slowly the replacement cycle will also slow from the recent 21.7-month rush (as per a 2011 study by Recon Analytics). Were this to happen and today's market darlings such as Apple and Qualcomm (QCOM) might also start being treated as the Intels of the world.
The mobile revolution is not the only thing leading to lowered PC demand. The "good enough" effect is slowing down the replacement cycle of desktops and laptops. The devices are simply good enough to perform most tasks given them. Additionally, niche tasks such as gaming, which still demand newer hardware, might be hit by the replacement cycle in the gaming consoles.
At some point, the same phenomenon can also hit smartphones and its component makers. Already there's some apparent increase in handset replacement cycles, and the U.S. actually has one of the fastest cycles in the world, so is even more ripe for some slowing down.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.