Yes, tablets are hurting PC sales...kind of

Selling PCs isn't the business it used to be.

HP said yesterday that revenue from consumer notebook and desktop sales dropped 23 percent in the last quarter, Dell reported yesterday its sales of computers to consumers dipped 7 percent, and Acer's shipments dove 16 percent percent. Meanwhile, tablets, specifically the iPad, are flying off shelves. Gartner is predicting Apple will sell 47 million iPads this year, out of 70 million tablets worldwide, and that the overall number of tablets will grow to 108 million next year.

Taken together it's easy to conclude that the relatively new tablets are cannibalizing PC sales in the consumer market. And they are, but not in a way you might expect. A recent study from Forrester showed that people who buy a tablet are more likely to have purchased a computer in the last two years. Forty-four percent of them had bought a PC in the previous year, 28 percent in the previous two years.

The more accurate conclusion is that tablets are establishing themselves as a replacement for a second or third computer. Consider the tablet the replacement for that computer people would like to have but could do without.

"Consumers who might have bought a new PC and thought, 'My current PC is good enough,' will buy a tablet or another device. Whereas before it would have been an additional PC purchase," said Michael Gartenberg, analyst with Gartner.

Tablets--in their current form--can't totally replace PCs on their own. They are not nearly powerful enough to accomplish every task the average person would need for a computer. You probably aren't going to be writing a term paper or a legal brief on your tablet. You're probably not going to play a graphics-intensive multiplayer video game, crunch numbers, or amass a large video or music collection on one either.

But you will tap out a few e-mails, check Facebook, Twitter, sports scores, stream a TV episode, read a digital book, play Angry Birds, find the nearest Starbucks, and do some online banking.

For many people that's good enough for most days, but not every day.A recent survey by mobile ad network AdMob found that among 1,430 tablet owners interviewed, 77 percent said once they bought one, use of their primary PC dropped. Not disappeared entirely, but was just less frequent.

Now, none of this is all that new. We've been debating the "post-PC era" and whether tablets are a fad for more than a year, but now the PC giants are feeling the results of the arrival of tablets. And it's not going to get better soon.

HP surprised many yesterday morning when it announced its consumer PC revenue sunk 23 percent in the last year. CEO Leo Apotheker said that trend will continue next quarter, when HP expects a "continued softness in consumer PC sales." In other words, the company doesn't expect people to start buying more PCs in any significant numbers in the next few months.

Acer began posting huge growth numbers two years ago, but it too has taken a fall. It was on a quest to best HP at its own game and become the largest PC maker in the world but was caught off guard by the consumer demand for tablets. Last quarter, Acer's PC sales volume dropped off 16 percent, according to IDC.

Dell yesterday said its revenue from consumer PC sales had decreased 7 percent. CFO Gladden said that during the last year "consumer demand has been a bit weaker and more challenged. It was a bit weaker than we expected" even for the most recent quarter.

Their struggles underscore how every PC maker needs a tablet strategy.

Acer was slow to move into their mobile strategy, though it says it's working on it a bit faster now. Last month the company introduced a new line of tablets and smartphones, and parted ways with its former CEO.

HP saw this coming a year ago when it purchased Palm, whose WebOS operating system is the basis for HP's tablet and smartphone strategy. It's taken awhile to integrate the new company and come up with a new product line up--while dealing with a CEO scandal and introducing his replacement--but the HP TouchPad is scheduled to arrive this summer. The company has a lot of work ahead of it, with the developer community and integrating WebOS into all of its devices, but HP has a plan.

Dell, while its tablet and phone strategy is more low profile, is not likely to feel the hit as strongly because 80 percent of its business is with business clients, not consumers. And the corporate refresh cycle is going strong.

Tablets are "clearly a factor on the consumer side, but it's early in that game," said CFO Brian Gladden on a call with reporters yesterday. "It's a net-additive device to the whole market."

But for Dell, the consumer market while it's important, isn't as crucial to its overall business, something Gladden pointed out.

"We'll continue to watch it," Gladden said. "But I'll tell you, in the grand scale of the size of the PC market, [tablets are] still very small."