Microsoft Corporation (MSFT), Intel Corporation (INTC): What’s Happened to PCs?

It was the year 2007. The Apple iPhone had just hit the scene, and most consumers didn’t even know what a smartphone was, let alone what it would do for the world. With its introduction, the iPhone brought the mobile computing revolution to the forefront, forever changing the world in the process. Fast-forward less than six years later, and a record 918 million smartphones are expected to ship this year across the planet. For those keeping track at home, that’s almost three smartphones for every one PC shipment!

Companies that failed to see the sudden shift have seen their attractiveness wane with investors. As these companies attempt to claw their way back into the realm of investor relevancy, those who fully understand what transpired stand to gain valuable perspective.

The PC isn’t actually dead

Source: IDC, Gartner. Units are millions.

Last year marked the first year since 2002 that PC shipments witnessed a worldwide decline. For something that’s been declared dead by many industry pundits, you would expect that PC sales had fallen off a cliff by now. Although a 3.5% year-over-year decline in sales could be considered alarming, given the fact that Microsoft Corporation (NASDAQ:MSFT) failed to revitalize the PC industry with the release of Windows 8, I think it’s a little early to call the PC officially dead. For now, the evidence suggests that the PC has experienced a bit of maturation in an era where users have rapidly shifted their preferences to a combination of smartphones and tablets. However, I do not believe investors should conclude that since smartphones and tablets have seen rapid adoption, it means that PCs will no longer be adopted.

What this really means: chips have changed

INTC data by YCharts

This wasn’t necessarily too relevant for the end user, but for the chip investor, it meant the difference between strong share appreciation and stagnation over the last five years. Mobile-focused companies like QUALCOMM, Inc. (NASDAQ:QCOM) and ARM Holdings plc (ADR) (NASDAQ:ARMH) have largely taken the wind out of Intel Corporation (NASDAQ:INTC)‘s PC-entrenched sails. In the coming years, Intel hopes it can reclaim what it missed during the rise of mobile computing with the introduction of compelling mobile chips.