How $199 Laptops Could Spell Doom For PCs

How $199 Laptops Could Spell Doom For PCs

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Investors are on edge these days, but what else is new. Prior to Microsoft (MSFT) releasing Windows 8, shares in PC makers and in Microsoft were in a holding pattern. Microsoft’s shares rose at around $32, while companies like Dell (DELL) and Micron (MU) had yet to bottom. Only Hewlett-Packard (HPQ) was falling in the summer months, because its problems were known. HP was in a multi-year transition, but the market wanted things fixed faster than that:

Chart of HP, Dell, and Micron:

When Windows 8 was released, shares in these PC makers did not rise. In fact, more uncertainty drove shares lower. The Surface RT tablet from Microsoft is a departure from the company’s alliance with hardware makers.

One of the greatest threats for investors in the PC sector is the marginalization of hardware. The transition of devices storing information in the cloud is making hardware less important. Sure, it benefits VMWare (VMW), Citrix (CTXS), and Salesforce.com (CRM), but the immediate threat for the sector is Google (GOOG).

Google already leads the budget offering of computing with its $249 laptop. More recently, Google is upping the ante. The company is working with Acer and is selling a laptop for just $199. At this price, it is lower than Windows 8-based machines and even less expensive than Apple laptops. The laptop may be sold at such a low price, because it runs an Intel (INTC) Celeron processor and a 320 GB disk drive.

The low-price of a Google laptop will make it harder to justify Windows Pro Surface devices, which are expected to cost at least $1000. Power-users will point to Adobe Photoshop (ADBE) as a reason to buy a more powerful device, but Google’s $199 laptop will appeal to a wider audience. Need Microsoft Office? Google Docs is available as an alternative.  Photoshop may be replaced with Instagram or a freeware program like GIMP.

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PC Companies

HP, Dell, and Microsoft are the usual suspects for PC-investing ideas, but their main attraction right now is low-valuation. According to Kapitall, HP’s Price of Profit, or POP, is just 4. Dell has a POP of 6, while Microsoft has a POP of just 9. Investors have clearly discounted any chance of growth in computers. The anticipation is that tablets and smartphones will dominate as consumption devices.

Practical investors should recognize that there is always a market for PCs, especially for content creators (nothing can really replace the mouse and keyboard right now). What the market is stating, though, is that consumption devices will only grow. Google’s low-cost computer will only get lower.

Cloud Computing Companies

Companies with a generally high POP may pull back, but shares will rebound faster than PC makers as markets become more optimistic:

 

1. VMware, Inc. (VMW, Earnings, Analysts, Financials): Provides virtualization and virtualization-based cloud infrastructure solutions primarily in the United States. Market cap at $36.98B, most recent closing price at $86.45.

 

2. Salesforce.com (CRM, Earnings, Analysts, Financials): Provides customer and collaboration relationship management (CRM) services to various businesses and industries worldwide. Market cap at $20.48B, most recent closing price at $147.32.

Beware! This company has an excessively high POP (denoted as “N/A” on Kapitall).

 

3. Citrix Systems, Inc. (CTXS, Earnings, Analysts, Financials): Designs, develops, and markets technology solutions that deliver information technology services on-demand worldwide. Market cap at $11.44B, most recent closing price at $61.16.

 

 

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13 Responses to “How $199 Laptops Could Spell Doom For PCs”

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  3. simon says:

    Gimp doesn't work with chrome, but does with linux… Linux on a cheap netbook never took off… So guessing how cheap computing is going to develop is murky. Dont really get the purported google chrome 'pixel', as it is supposedly an i5 chip – surely that would be a waste of power and too much money. Cheap laptops with higher resolution screen s would be nice, but is it realistic?

  4. Soon the cloud storage will take over the storage leadership thereby reducing the importance of hardware resources. I think $199 laptop will be really being a remarkable achievement if made possible. I think investors will be on the edge of on what to invest in.

  5. Kenny says:

    Laptops get cheaper every year. However, people still use them, so I don't think it will go anywhere.

    best gaming laptops under 600 dollars

  6. Every year new technology are implemented in the machine. And this thing has given a more desperation towards the computer gaming

  7. it is lower than Windows 8-based machines and even less expensive than Apple laptops. The laptop may be sold at such a low price, because it runs an Intel (INTC) Celeron processor and a 320 GB disk drive.

  8. Few days ago I've installed windows 8 on my laptop and I've used this new window version from a few weeks. That is a good experience for me and I hope it is good between others any windows version.

  9. Simply, happy to know your writing that you've share is here about the laptops and computer. Which is very handy one hearing to me and I hope it'll helps me a lot to enjoy a quality laptops with cheapest price.

  10. HP, Dell, and Microsoft are the usual suspects for PC-investing ideas, but their main attraction right now is low-valuation

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