PC vendors and the big tablet miscalculation

Last week, Amazon flooded us with new Kindle Fire models, and finally the UK market has the slate incoming (or two versions of it, the standard Fire and 7in Fire HD). But this is only the beginning. This autumn, we'll see a glut of Android tablets on the market, and while the device is nothing new, their manufacturers are.

Tablets go back at least 20 years although up until 2010, traditional PC companies made all of them. The biggest player in tablets had been Panasonic, which created many rugged versions used in military, transportation, law enforcement, and other vertical markets where industrial-strength tablets are vital to workloads. Recently, it's interesting to note that most of the major movers and shakers in tablets are not PC companies, but rather consumer electronics companies.

This is an important distinction. To PC companies, tablets were just handheld versions of PCs since they were all based on Windows and supported Windows apps. In late 2008, as word surfaced that Apple might be entering the tablet business, it became clear that tablets were a really big deal and could have a huge impact on the future business of PC vendors.

On two occasions, I visited the offices of some vendors to present my opinions on how tablets would impact the PC market. Now, I did not have a crystal ball that helped me come to my conclusions, but I've followed Apple for more than 30 years and have developed a really good understanding of how the company works. I assumed that if Apple was actually going to release a tablet, it would apply its design genius as well as marketing muscle to make it successful.

The response from the traditional PC companies was interesting. They mostly thought that a tablet had proven to be successful only in vertical markets and would be too expensive for consumers. They were all focused on quarterly sales goals and pretty much dismissed my predictions that a consumer interest in tablets could impact their current PC businesses.

Now, two years after the iPad was released, all of the PC vendors are scrambling to play catch up. And to their chagrin, they not only have to compete with Apple, but with consumer giants like Google, Amazon, and Samsung. The scariest thing to them is that the tablet is actually eating into their PC sales – a reality they could not have imagined even a year ago.

All of the PC vendors are Windows-based companies and are now putting their hopes into Windows 8 for tablets. They believe that this will allow them to belly up to their competitors, especially Apple and Samsung, which have gained serious traction in business and enterprise. I am not sure that this will happen, however.

While I expect Windows 8 to have some success in businesses where backwards compatibility with existing IT software apps is important, for Windows 8 to gain any serious ground, it will need apps written specifically for the Windows 8 touch UI. My friend at TechPinions, Patrick Moorhead, argues that Windows 8 hardware without touch-based apps is "meaningless."

I agree. Unless the software community backs Windows 8 with touch-based apps, I don't see how Windows 8 can become the saviour of these PC vendors.

The current tablet vendors see an opportunity to block out traditional PC vendors, especially in consumer markets, by starting a price war that will make it hard for Windows 8 tablets to compete. This is because Microsoft's OS tax is probably more than $50 (£31) per device and has to be factored into the price of every Windows-based tablet.

In fact, Amazon's more aggressive pricing on its new Kindle Fire will trigger price wars for 7in tablets. And while we don't know where Apple will price its looming iPad mini, if it's $249 in the States as some suggest – that’s £156 in our money, although of course it won’t translate directly – it could even affect the lower priced Android tablets given that people are willing to buy up to get Apple devices.

I have been watching the PC industry from day one and for the first time, I am very concerned about the vendors that are still around. Clearly, PCs are not going away and they will continue to sell at least 300 to 350 million units per year worldwide for some time. However, vendors will have to fight to succeed in tablets and, whether they like it or not, the devices will continue to impact their PC sales well into the future. Not to mention, it will be hard for them to compete in tablets outside of enterprise if they only push Windows 8 slates.

Given the fact that the PC vendors have led the charge in PCs for decades, it is really surprising that they missed the boat on this one, and will be paying for this error in judgement for many years to come.