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The all-in-one, a monolithic desktop form factor that combines the CPU and monitor, has largely
been a sideshow in the PC market. Except for Apple's iMac, none has been much of a seller,
despite some of the advantages that such systems offer. However, various trends in technology
and market development have changed dynamics sufficiently that a reexamination is warranted.
Although the all-in-one is expected to remain a minor player, even over the longer term, it is likely
to become a more significant factor than before, as new compelling designs come to market
and consumer lifestyles increase all-in-one's desirability.

Design Trends and the Importance of Style

In the past several years, as the PC market has consolidated and become more mainstream,
competition among PC vendors has shifted from purely performance and price to include the
area of design. The consumer segment, at the start of the decade accounting for only one-third
of all PC purchases worldwide, has risen to more than 40% of total shipments, depending on
the season and the region. This figure is even higher in developed regions — hitting 43% in the
United States, 44% in Western Europe, and 43% in Japan during high season. As consumers
have embraced PCs, they have become, aside from a means to communicate, a way to enjoy
media — movies, music, photos — individually and in various combinations.

Part of this evolution has involved, not only a swing in emphasis from the place of business to
the home, but also a change of venue from the den to the living or family room. And for this
reason, design has become far more important than it was when PCs were just used for
calculating cash flows and producing business correspondence.

Clearly, notebooks have benefited from this trend. They are lightweight and small and can be
closed up and put away when not in use. But notebooks are still expensive relative to desktops.
Their performance is also limited by comparison. And, because of their portability, they typically
have a screen no larger than 17" (although a few experimental models reach 20"). Consumers
units now represent just under half of all portables shipments.

But most consumer systems are still desktops of one sort or another. And because these
stationary clients typically remain visible in the living areas, in some cases dominating a media
room, the need to have them fit in with interior décor has risen.

As the PC has converged with the consumer electronics device, the importance of style,
personalization, and design have moved to the forefront. Many vendors have simply re-spun
their standard minitower desktops for the consumer market, rounding off corners, hiding
unsightly ports, slots, and bays behind grills, and adding blue-lit buttons. Others have gone
further, attempting to make the media PC into a piece furniture in its own right, something in
which the family would take pleasure themselves and be proud to show to guests.

Resurgence of the All-in-One Category

The all-in-one desktop is essentially a monolithic unit containing the monitor and the CPU.
Unlike notebooks, which have built-in keyboards and pointing devices, the all-in-one's keyboard
and pointing device are typically separate units, and these days, a third peripheral, the media
remote, is likely also included separately. Speakers are also usually built into the base unit.
The all-in-one is not thought of as being portable, although it can be lugged around or moved
fairly easily. This feature is important for homes, where furniture gets rearranged periodically to
suit changing tastes, new elements, and whimsy. A conventional desktop, with all its wires,
connections, and peripherals, tends to stay where it is first installed.

The first really successful all-in-one was the CRT-based iMac, introduced in 1998. Over its
three-year life, the original iMac sold 6 million units. Despite hitting the back edge of the
envelope during which CRTs made any sense as monitors, the iMac was a great victory for
Apple based on its simplicity and clean outline. The biggest change since then is the
disappearance of CRTs and the rise of flat panels. Today, Apple still has the leading all-in-one,
the flat-panel-based iMac. Vendors with flat-panel all-in-ones now in the market include
Gateway, which is working on its ninth-generation unit; HP, which recently fielded the
TouchSmart series, an attractive unit featuring a touch-sensitive screen and envisioned for the
kitchen or family entryway area; and Sony, which is currently marketing a combination PC-TV,
essentially an all-in-one with a TV tuner. Other vendors are considering or working on their own
designs.

With performance coming in increasingly smaller, less-power-hungry packages, vendors have
the opportunity to begin to make the CPU disappear into the monitor, which, by contrast, is
growing in size. This trend gives designers flexibility they never had before and is likely to
stimulate more attractive products.

The Wireless Connection

Another trend supporting the all-in-one category is a further reduction in wires made possible by
the advent of wireless networking in the home. With Bluetooth or RF connections for peripherals
and 802.11 links to the Internet and to content stored in other machines in the home, the all-in-
one really needs only one connection — the power cord. This simplicity lends itself to design
elegance and portability (or at least luggability).

Wireless network equipment for the home is one of the fastest growing categories in consumer
electronics in the United States. Almost a quarter of all U.S. homes now have 802.11 wireless
networks, and similar rates are seen elsewhere in the developed world. This trend will clearly
help with all-in-one penetration.

Revised Forecast

In light of the aforementioned developments, Endpoint has reexamined the forecast for the mix
of desktop types over time. The existing long view of the mix out to 2015 shows the all-in-one
rising to only 5%. However, given the success of recent all-in-ones (notably Apple's iMac),
design, technology, and usage trends favoring this form factor, and vendor plans in the category,
that number could rise to as high as 7% (see Figure 1).

Figure 1

On to Success?

The dominant stationary client by 2015 will be the small form factor desktop, defined as the
smallest stationary CPU possible without introducing miniaturization costs (primarily more
expensive mobile components). The ultrasmall will also be important, but less so because of
its price premium (based on the use of mobile components). Larger CPUs will be relegated to
specialized applications like gaming, workstations, and highly configurable units. Blade clients
will become more important, particularly in the commercial segment. All-in-ones will be used
primarily in consumer, but will have some place in front-office applications, where space
savings are important and design is part of the corporate image.

Whether the all-in-one meets its raised expectations will depend on how good the designs are
that come to market in the next several years. The Windows camp must match Apple in
elegance and simplicity. A number of designs are in various stages of development now and
the market has never been riper. The beneficiary will be, of course, the consumer, who is likely
to have a choice of great products that match — or at least fit in with — their interior décor.

© 2007 Endpoint Technologies Associates, Inc. All rights reserved.