The 'Return' of the PC

NEW YORK ( TheStreet) -- A gloomy outlook has darkened the desktop computer industry for years after consumers switched first to laptops and now tablets.

In the past three months, several news sites including Forbes, Fox Business and Salon reported the personal computer, or PC, is dying or dead.

Then, this week, Apple ( AAPL) shocked many by reaffirming its commitment to desktops. That's right: A new Mac Pro desktop with a radical new design is coming "later this year."

Could Apple magic lead a desktop revolution?

"Wow, this is a seriously sexy and powerful little unit," wrote MacNewsWorld.com. "...It shows that the company still takes the Mac and its product design seriously," declared MacWorld.com. "Apple's new machine is long overdue and maybe now the competition will finally step up," proclaimed PCMag.com.

But for those in the know, desktop PCs have always continued to sell, a lot --just not as many as newer technologies.

Market researcher IDC just revised its projection downward, but it still expects 134.4 million desktop PCs will be sold this year. By comparison, the company projected 187.4 million laptops, 229.3 million tablets and 958.8 million smartphones also will ship this year.Mercury Research, a firm that tracks PC components sales, estimates 34.8 million desktops sold during the first three months this year. And that was a rough quarter, falling 18% from a year ago, said Dean McCarron, Mercury's president and principal analyst.

"Those are near record-setting declines, which is where the doom and gloom comes from," McCarron said. "But even with this decline, the overall market remains larger than it was at any time prior to the 2008 financial crises. The desktop market today is on par with its size in 2007."

Surprised? A good number of people who need desktops are video and sound editors and folks handling 3-D graphics and processor-intensive files. There are also a number of hardware enthusiasts, do-it-yourselfers and gamers willing to spend a small fortune for a high-performing desktop -- or the components -- to push technology to the limits.

A recent bright spot for the consumer desktop industry are all-in-one computers, which include a built-in monitor. That segment grew 25% last year over the previous year, according to Intel ( INTC) All-in-ones are becoming the family computer that stays in one spot and everyone in the house shares. Mercury Research said these consumer-friendly PCs accounted for 27% of computers sold during the fourth quarter of last year in a market that was essentially zero just a few years ago.

Other desktops gaining an audience are small boxes like Apple's Mac Mini that may as well be portable because of their diminutive size. They tend to serve as media centers for the living room TV. Intel calls the segment NUCs, short for Next Unit of Computing.

Intel focuses more on mobile PC chips and products today, like ultra-light notebooks such as the MacBook Air. But during the big debut of Intel's fourth-generation Core chips last week, the two dozen new computer chip models based on the new "Haswell" chip were evenly split between desktops and laptops, said Dan Snyder, an Intel spokesman.

"Saying an entire market is dead is kind of shortsighted," Snyder said. "Some, like the all-in-ones, are growing. Are we focusing a lot on mobile? Of course. We think mobile is the trend of the future. But as you can see with the fourth-generation Core, we announced just as many (models) for desktop as mobile."

Ironically, desktop enthusiasts are the ones who set the trends for computing. We're not talking mainstream users, but rather the video editors, gamers and system builders. They are the ones who want faster chips with better performance, and they're willing to spend generously on the latest technology. Companies, like Intel, won't ignore that.

"The enthusiast community isn't huge but it won't disappear overnight," Snyder said. "At Computex (a computer show in Taipei last week), we did a huge overclocking event," he said, referring to the process of running a computer component at a higher number of clock cycles per second than it was designed to handle. "It was packed to the rafters. They were up till 5 a.m. That crowd is not going to disappear and they influence a lot of decisions as well."

Apple's new Mac Pro, which will include an Intel Xeon E5 chip, is remarkable not just because it is a new desktop computer, but for the company's transformation of what a desktop should look like. Apple obviously spent time, research and development to change things. The Mac Pro looks like a svelte coffee canister and it's packed with power, fast ports and up to 7 teraflops of computing power. No, Apple definitely did not bid desktops farewell, as some had predicted.

Lou Borella, a professional video editor in New Jersey, wonders if he had something to do with Apple's announcement this week. Borella started the "We Want a New Mac Pro" Facebook page last year after Apple's feeble attempt at updating the professional desktop line, which hadn't been refreshed since 2010. He just wanted to know whether Apple was giving up on pro users and he needed to invest in non-Apple technology.

A member of the Facebook page, which today has nearly 22,000 fans, complained to Apple last year and, surprise!, got a promise from CEO Tim Cook, who said, "Don't worry as we're working on something really great for later next year."

This year, Borella made a big push. "Show the pro some love. All we want is one slide," Borella said he told Apple.

They got more than one slide and saw a sneak peek at the new Mac Pro at Apple's Worldwide Developers Conference on Monday. No sale date or price was announced other than "later this year."

"I don't think that was planned. Maybe it's all my ego, but I told them if you don't show us anything, we'll jump ship," Borella said. "The new tower came out and it's great, although I think it's going to cost a lot more than I thought."

People may not be buying as many desktop computers as they once did. Nevertheless, the market size is significant and demand continues.

"Actually, the market remains quite large. Though we've been seeing declines in the market, this has as much (or more) to do with the weak economy as it does any structural issues within the PC market," said McCarron, with Mercury Research. "...Some of the growth opportunity has been impacted by the emergence of tablets, but we're seeing both the tablet and PC markets seek their own levels and it's expected we'll see stabilization soon."

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Tamara Chuang is an outside contributor to TheStreet. Her opinions are her own.

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