Tablet Mania: Why The Tech Industry Thinks Their Time Has Finally Come

Here’s a story I wrote that gives some perspective on the long and mostly disappointing history of tablet computing.

The Next Big Thing, 20 Years Later
The tech industry thinks the time is right for tablets, thanks to lower prices and friendlier features

By Spencer E. Ante

If there was a land of misfit gadgets, the tablet computer would be one of its oldest residents. The tech industry, though, refuses to give up on these slate-like portable PCs. Tablets from Hewlett-Packard, Dell, and others were some of the stars at this month’s Consumer Electronics Show in Las Vegas, while the buzz around Apple’s long-awaited entry into the market, due out this spring, is already deafening. “The industry understands better how people can use tablets,” says Roger Kay, president of Endpoint Technologies Associates.

Yet PC makers have been trying to sell consumers on the utility of tablets for decades—with little success. In 2001, Microsoft Chairman Bill Gates predicted that tablets would be the most popular form of PC sold in the U.S. within five years; in 2009, they made up less than 1% of the market, according to estimates from research firm IDC.

The first generation was doomed by a combination of big price tags, short battery life, and clunky interfaces. Tablets’ capabilities have since evolved, as have the tastes of consumers. Portability is paramount, and the latest crop are lighter, boast longer battery life, and better screen technology. Software is more sophisticated, too, and Web connections have improved. “The timing is right for this,” says Philip McKinney, vice-president and chief technology officer of HP’s Personal Systems Group. “We wouldn’t go into a market that we felt wasn’t going to be widely adopted.”

Read the rest of the Bloomberg BusinessWeek story here.

Tech Spending to Decline in the U.S., Says IDC

This IDC announcement isn’t too surprising. With all the turmoil in the U.S. economy and many big companies filing for bankruptcy, it had to hit demand for technology. Historically, tech spending is tightly correlated to earnings of the S&P 500. And with earnings coming down, that means tech spending is going to take a hit.

We saw this during the dot com bust and we’re seeing it again. The only question is: Will tech spending take a bigger hit than during the dot com bust or not? My educated guess is that won’t be as worse since last time around the implosion was centered around tech. This time the industry is taking collateral damage. It’s the source of the storm.

The numbers support my hypothesis. Even though IDC forecasts about a 1% drop in U.S. tech spending in 2009, during the dot com and telecom bust, US tech spending declined 6% in 2001 and 5% 2002. Let’s hope IDC does not roll out another lower revision.

The silver lining is that IDC still expects tech spending to grow globally.

IDC Expects Worldwide IT Spending Growth to Slow Significantly, But Remain Positive, in 2009

FRAMINGHAM, Mass., November 12, 2008 – Worldwide spending on information technology will slow significantly in 2009 as a direct result of the global financial crisis that began in September 2008. According to a newly revised forecast from IDC, worldwide IT spending will grow 2.6% year over year in 2009, down from IDC’s pre-crisis forecast of 5.9% growth. In the United States, IT spending is expected to decline to 0.9% in 2009, much lower than the 4.2% growth forecast in August.

Here’s the full press release.

The Coming Tech Recession?

Despite today’s 75-point basis point cut by the Fed, it looks like the U.S. economy is headed for a recession. Which raises the question: How bad would the recession be for the tech industry? 

My bet is that such a tech downturn would be short and not that painful–not nearly as long and painful as the last tech downturn from 2001-2003/2004.  Why? Well, this time there is no dot com bust, no telecom meltdown and no Y2K overhang. In other words, this tech recession, if it happens, is all about a general economic slowdown, and has little to do with tech fundamentals. That means when the economy picks up again, probably in second or third quarter, the growth rate of the tech industry will revive again. Currently, tech research firm IDC is forecasting around a 4% growth rate for the US tech industry, down from 6.6% last year.

If a recession took hold, IDC analyst Stephen Minton says we’d end up with no growth “as long as the recession was short and lasted 2 to 3 quarters.” During the dot com and telecom bust, US tech spending declined 6% in 2001 and 5% 2002.  Of course, the slowdown would effect some markets more than others.

What are the bright spots? “Some of the fastest growth came from smart phones, especially outside of Europe,” says Minton. “Software is the fastest growing sector: infrastructure, security, virtualization, applications like business intelligence.”

IDC’s recent survey showed front-end applications could see cutbacks if tech budgets are scaled back. But infrastructure programs like security and virtualization could hold up. “CIOs are very reluctant to scale back spending there,” says Minton. “Infrastructure and data center projects would be least likely to see cutbacks. But the programs that touch end users could see cutbacks.”

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