Smartphones and the PC industry

There’s no doubt that the PC and smartphone markets are becoming increasingly intertwined. A few years ago, it would have seemed odd to see PCs being sold in Carphone Warehouse, but now the netbooks given away with broadband contracts by these types of retailers are making up an increasingly significant part of the computer user base.

In terms of the technology, there isn’t a great deal between smartphones and lower-end PCs anymore. Not so long ago, sending emails, browsing the web, watching video, listening to music and gaming were purely the preserve of PCs.

These days you don’t even have to go very far up the mobile phone food chain to get a device which does all these things. On top of this, you have manufacturers from either side of the fence parking their tanks on each other’s lawns. Acer, one of the biggest PC vendors, started building smartphones last year, around the same time mobile phone giant Nokia announced its own laptop. The distinctions between these once very separate industries has never been blurrier.

For many PC retailers, the presence of network operators on their patch has become a source of strife, but on a wider level it has been argued that the overall crossover between the two industries could bring indirect benefits for all. There is no denying the extent to which the PC industry is being affected by high-end mobile phones and vice versa – a trend which doesn’t look set to change – however the process may not be plain sailing.

“The real issue around convergence of the two industries is the diversity of the business models for smart phones and technology products,” says Alastair Edwards, a senior analyst at technology research firm Canalys. “PC margins are far lower both for manufacturers and the channel, so that’s pushing a lot of technology vendors into the smartphone market. So we’re going to see a lot of traditional PC vendors trying to get into this space, probably trying to emulate a company like Apple. But really, Apple’s position is unique and it’s going to be difficult for the relatively commoditised PC vendors to actually go into that market. The tech industry is going to become more skewed towards the sector, but with some big caveats. There’s going to be some successes and some big failures as well.”

The PC manufacturing giants that are moving into the smartphone market clearly see the convergence as a big business opportunity. There is an argument that since the two segments are getting so much closer together anyway, the issue of what would otherwise be seen as dramatic diversification is more akin to just keeping up with progress.

Acer is one of the PC vendors most aggressively targeting the smartphone market. Massimo D’Angelo, SHBG vice president of global telcos and channel sales tells us: “For Acer, the smartphone segment is a very strategic one because it’s linked with our internetcentric strategy. It’s all about consuming content, whether you do it on a two-hand product like a netbook, or on a one-hand product like a smartphone. The rise of the
smartphone has had a big impact on the PC industry, and it’s a great opportunity for everybody involved, and it’s good for the channel.”

Meanwhile, fellow PC giant Dell has recently created a new division called the ‘communications solutions unit’. The firm is keen to stress that this operation is about more than just handsets, and officially handles mobile communications of all types (see page 9). However, the move certainly brings Dell into closer competition with entrenched smartphone vendors such as Apple, Nokia and RIM.

Furthermore, Dell’s new division will be headed up Ron Garriques, Motorola’s former president of the mobile devices business. “I think [the convergence] is going to be a huge boost, I really do. Dell’s had great success with embedded sims in netbooks, so there’s no need for dongles and other easily breakable peripherals,” says EU general manager for Dell consumer Sarah Shields. “If you look at some of the future aspirational products that are being talked about, absolutely it will. I spend most of my time travelling, so I have a mobile I can browse the internet on, and I have a netbook I can do things a little more complex on. People are prepared to change, but one thing they’re always going to want to do is have constant access to the internet. Absolutely it will open up new opportunities. It’s new technology and its going to be huge.”

The interest from the top tier companies in each other’s industries is clear – and mobile phone retailers and network operators have certainly made some aggressive moves into the sales side of the technology.

While there has been a lot of talk in the past of PC retailers moving into smartphone sales, the nature of the contract sales model could make that a tough market to crack. It is easy to see other industries selling PCs as a negative, but there are plenty of positive messages from the top tier vendors in our industry regarding the peripheral advantages that will benefit everyone, namely new technology and products born out of a closer partnership between the PC and telecoms sectors.