Itty-Bitty PCs Attack Computer Company Margins (AAPL)(DELL)(HPQ)(INTC)(RIMM)(NOK)

The PC industry’s race to create smaller and smaller computers to stave off competition from smart phones has begun to backfire.

Intel (INTC) has started making tiny, energy-efficient chips to power the new machines which are meant to be mobile, using WiFi and 3G cellular networks to connect to the .

According to The New York Times. "Some of the big computer companies put a positive spin on the low-cost machines, saying they welcome new categories. But they would just as soon this niche did not take off, given the relatively low profit margins."

After a decade of keeping out of one another’s back yards, PCs and cellular handsets are about to have at it. In the one corner sits Dell (DELL), HP (HPQ), and Lenovo. In the other, Apple (AAPL), RIM (RIMM), and Nokia (NOK), who want to make the newest versions of their smartphones the information and entertainment devices of the future.

In all probability, neither side will win the war because there may well not be one.

Most of what consumers and businesses do on PCs will never be suited to handsets. Extremely modest processor power and dwarf screens will see to that. Video has almost no place on a handset. Neither do spreadsheets, Powerpoint presentations, or large file sizes.

Even a computer which is smallish cannot match a handset which is not much larger than a pack of cigarettes, especially since no one smokes them any more. The handset has become the perfect device for e-mail, voice, and modest viewing of data and small attachments. It is ill-suited handle any more than those features.

At one point, the PC was going to replace the TV. That did not work out either.

Douglas A. McIntyre