How laptops took over the world

The rise of portable computing has forced companies to rethink how they let staff work – and is shifting the balance of power in the IT industry. In January 2003, Steve Jobs announced to a slightly surprised Macworld audience that "this is going to be the year of the notebook for Apple". There was a clear ambition to push up the sales of portables – on which margins tend to be better than on desktops.

Jobs was right in spotting an unstoppable trend: the rise of the laptop. This is a category that now includes not just "notebooks", as Apple always refers to them, but also, since 2008, the smaller "netbooks". As Moore's Law – a halving of cost for the same spec – has applied to processors, RAM and even disk storage, laptops have become not just an interesting option for a second computer, but the primary machine for a lot of people.

Apple didn't quite manage to make 2003 the year in which sales of laptops exceeded those of desktop; it was July 2005 before that happened, and April 2006 before it began to happen consistently. But now laptop sales always exceed desktop sales for the company; in the past quarter, when it sold a record 3m computers, nearly three out of every four was a laptop. And though Apple is the leader in this trend, laptops are taking over computing, especially with the rise of netbooks.

Looking at the trends in computer sales, you may wonder when laptop sales will overtake those of desktops worldwide. The answer is simple: they already have. For 2009, 159m portable machines (a segment that includes both notebooks and netbooks) will be sold, compared with 124m desktop machines, according to the research company IDC. Gartner says that in the first quarter of 2009, desktop sales declined 16% year on year; laptop sales fell by 3%, but netbook sales leapt sixfold, so that they now make up 20% of all laptops sold.

Leaving your desk behind

For computer makers, the shift to laptops offers a chance to increase profit margins – although all but Apple still struggle in what has become a commodity market. (Apple is estimated to have around 75% of the share of laptops sold in the US priced over $999.) Netbooks have once again eroded those margins, but the fact that you can't build your own laptop, while it is comparatively easy for anyone to take a chassis and build a desktop machine, leaves more margin in that sector. Those are the bald numbers – but they hide a much more subtle and far-reaching shift in the way we now live our lives, says Richard Holway, the veteran analyst who is chairman of TechMarketView.

"The obvious and banal answer [to why laptops are selling better and better] is that people don't sit at desks any more," says Holway. "In about 2002 or 2003, we started to talk about 'mobile internet devices' which were, at that stage, only available in one form – your laptop. Which, I would remind you, weighed about 3kg, cost £1,500, and was something that was at best luggable even then.

"But we said then that the world was moving towards a situation where 'knowledge workers' would do things on the move, from a number of different devices, which had to get smaller and be able to link to the net at broadband speeds, anywhere. I called it the 'Holway Martini moment' after the old Martini ad 'Any Time, Any Place, Any Where'. This is 'any time, any where, any device.' " The point, Holway says, is that people don't just want to do computing anywhere in the world – they also want to do it with a multitude of different devices.

That change could have dramatic effects on how companies think about their investments in computers, and how they expect people to work. The spread of mobile internet access has changed approaches to connectivity. Just as mobile phones evolved over the past 20 years from being a luxury, to an expensive alternative to the landline, to a cheap necessity, so internet access on the move is evolving too: from a near-impossibility to a pricey extra to something that is becoming more affordable, driven by the widening access to 3G networks, Wi-Fi connections and even WiMax, a sort of long-distance Wi-Fi.

But that doesn't only have implications for the makers of laptops, it also affects companies that have relied in the past on desktop machines for revenues. That means, for example, Adobe, whose clients tend to be those in graphics-heavy environments, who need powerful desktop machines to do their tasks – and Microsoft. It may be significant that both have announced significant falls in revenue and profit; in July, Adobe even introduced short-time working for its staff as a cost-cutting measure, while Microsoft has announced expense reduction measures. True, Microsoft receives money for Windows licences; but it has been hit hardest by netbook sales, because it got less money per installation than for a full-sized notebook or desktop; and netbook sales have exploded, especially in Europe. Arguably, every netbook sale until the launch of Windows 7, even if it has a Windows XP licence, represents lost money for Microsoft; on a notebook or desktop, it could charge the maker for a pricier Vista licence.

In January, Microsoft announced falling results in which revenue from sales of Windows fell by 8% "as a result of PC market weakness and a continue shift to lower-priced netbooks". On the latter, Microsoft is hoping that Windows 7, released last week, will pull it out of a financial hole; but netbooks still represent a serious threat to that model, and the launch, expected next year, of Google's Chrome operating system – targeted, again, at netbooks – could begin to eat into Windows revenue if it gains any significant traction.

A moveable feast

The trend towards laptops has been growing for a long time. In the US, laptops first outsold desktops in the retail market for a full month in May 2005, according to the research firm Current Analysis. NPD Group, which looked at revenue rather than units, saw the crossover happen two years earlier, in May 2003.

Laptops had inched towards that crucial measure a few times, but in 2008 the US swung over wholesale towards them; the Los Angeles Times noted in January 2008 that the Burlington Northern Santa Fe railway had bought 4,000 Dell machines – of which 60% were laptops, in order that rail inspectors could file reports from trucks, and other staff could work from home.

Holway thinks that this is our future and we should adjust to it, because device makers, and those providing accommodation, will cater to it. "I've just been on holiday on a ship which had Wi-Fi in every cabin. And no, it wasn't an oligarch's yacht – just a cruise ship.

And then I was on the Jordanian desert, where we drove for five hours into the middle of nowhere, to meet some Bedouin and spend the night there. You could see the stars and everything. I started wondering what the strange glow near the ground was. It was all their mobile phones. And in the morning, on the way out we passed a mobile phone mast about the size of the Eiffel Tower – which they all used to keep in touch."

Banking on change

Mobility isn't just for knowledge workers. Almost everyone needs it, Holway contends: "I had a man come to fix my front door lock, and he was able to send the invoice and my credit card payment through from the doorstep via his phone." Where the mobile phone, used for a voice call, used to be the method used for constant connectivity, now it is a mobile internet device, used with data connectivity, that does the same tasks – or multiple ones, such as finding a location, checking details before doing a job, checking details while on the job, sending an invoice, and processing a credit card transaction. The only places where you might still need desktop machines? "Banks," Holway allows. "But at the end of the day, the number of jobs that are purely static is going to fall and fall."

For that reason success in the future is likely to lie with companies that can make the best mobile internet devices, as those are the ones that have the best chances for growth. That, is not encouraging for Microsoft, which has been pushed into third place in the smartphone market by RIM and Apple, and now faces a significant challenge from Google's Android: the Taiwanese handset maker HTC, previously responsible for more than 80% of Windows Mobile sales, is switching to Android. Losing with netbooks, losing on mobiles: Microsoft may have a problem with the mobile workforce.

In fact, all sorts of expectations are changing. "Which company sold the most portable computers in the UK last year?" Holway asks, and leaves the answer hanging. "HP? Dell? No – Acer. It's because of netbooks. Everybody's buying them."