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4 trends pinching Intel and computer vendors

Intel (INTC) has cut its quarterly revenue projections by $1 billion, blaming a lack of desktop PC sales. Behind the slow movement, the company said, was reluctance on the part of corporations to upgrade from Windows XP.

But the news is more than an example of occasional events, as Intel tried to spin the results. Fundamental changes in the hardware business will continue to alter how people satisfy their computing needs. Here are four trends that will determine which companies wind up as the winners and losers in this shifting landscape:

  • Corporations are tired of the upgrade game -- Technology vendors exploited the upgrade game for decades. Companies were expected to keep moving to new versions of software and, of course, the hardware that powered it. The play used to be adding functions over time to entice users. Executives became tired of being cash cows, and so they reduced the knee-jerk check writing. Regarding Windows XP, Microsoft (MSFT) has actually stopped supporting the operating system, but many companies still haven't updated. Clearly, they don't see official support as helpful, and they don't want to spend more money on new hardware when they think the old machines work fine.
  • Tablets aren't saviors -- When Apple (AAPL) debuted the iPad, many pundits and fans predicted that tablets would replace traditional PCs, and in many ways they have. Except, even Apple has seen a trend of slowing unit sales. Other vendors of tablets running either a version of Windows 8 or Google's (GOOG) Android have flooded the market with new models. But even with all the choices, IDC says tablet sales will barely increase this year compared to 2014. Consumers and business users don't buy new units at the rate they once did with PCs, probably because their devices are already powerful enough to do what they need.
  • Cloud computing is the great leveler -- One reason people once scrambled for new computers was Moore's Law, the observation that hardware became significantly more powerful every 12 to 18 months without a corresponding increase in price. When you're connected through broadband Internet to powerful servers that do most of the work, the speed of the device on your desk or in your hands becomes far less important. It's like the old days when terminals were connected to mainframes. The display machine needs to be only so powerful.
  • Phones can be enough -- Big-screen smartphones have become widely popular. They possess much of the power that tablets have and possess displays large enough to do most of what the average person might want to do. With the perceived low prices (thanks to carrier subsidies reimbursed by consumers' monthly service charges), they're the best deal. Most buyers upgrade every two years, and cloud services make up for any lack the devices might have on the power front.

Although desktops and laptops are far from obsolete, all these changes are having an impact on sales. Lower volume, in turn, will begin to erode the cost advantages big corporations gain from volume purchasing. Both factors together will ultimately affect financial performance of Intel and others in this shrinking market.

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