Tablet computers will cannibalize PC sales much faster than previously expected, according to stunning new research from Goldman Sachs that paints a challenging future for traditional tech heavyweights—from Microsoft to Intel--if they fail to respond to the threat of new form factors.
Analysts at the investment bank said they expect tablet sales to cannibalize PC sales at a rate of 33% to 35%. As a result, they believe the PC market will grow just 8% next year, well below the low to mid-double digit growth expected by many other market watchers.
Goldman said Microsoft and its partners have been too slow to respond to the threat to their core franchises posed tablet offerings from Apple, Google, and their partners. "What is surprising is that many of these products are not utilizing Intel microprocessors or a Microsoft operating environment," wrote Goldman Sachs analyst Bill Shope, in a report published Sunday.
Shope said he expects that 54.7 million tablets will be shipped in 2011, an increase of more than 500% over the current year.
"We expect the vast majority of these devices to run the ARM architecture with either iOS or Android as the operating environment. If this is the case and our tablet forecast is anywhere near accurate, this would be the first time in three decades that a non-Wintel technology has made legitimate inroads into personal computing," wrote Shope.
"The fast rise in tablets could have significant implications across the technology industry as a whole," said Shope, who estimates that, if the iPad is included, Apple's share of the consumer computer market is approaching 12%.
As for Microsoft, Shope's colleague, software analyst Sarah Friar, noted that "a tablet response is still not forthcoming." Microsoft CEO Steve Ballmer earlier this year said the company would have Windows 7-based slates in stores by Christmas, but that failed to materialize.
Microsoft is now apparently waiting until early 2011, when it plans to release tablets that run Intel's Oak Trail processor for mobile devices. As far as Goldman Sachs is concerned, that may be too little, too late. The firm downgraded Microsoft from "Buy" to "Neutral" in October, and is maintaining that rating with a 12-month price target of just $29.
Microsoft shares were flat at $27.42 in late-afternoon trading Friday. Intel shares were off 1.69%, to $21.54. Apple was up .85%, to $323.27, while Google gained .94%, to $597.76.