Device ecosystems are changing rapidly, prompting equally quick change to the product strategies of PC stalwarts HP, Dell and Lenovo as mobile device vendors such as Apple and Samsung exert greater influence over consumers and enterprises based on data from Technology Business Research’s fourth quarter Computing Devices Benchmark report.

Overall smartphone sales accounted for 56.3 percent of the $121.2 billion in overall devices revenue in the fourth quarter, and Samsung’s and Apple’s combined smartphone revenue of $51.3 billion in that quarter was nearly equal to the cumulative $54.2 billion revenue of tablet and PC makers in the same time period.

In response to the surge in mobile devices, especially smartphones and tablets, which recorded unit shipment increases of 37.6 percent and 39.3 percent, respectively, PC makers will aggressively fill their ecosystems will innovative products aimed at countering their mobile- and tablet-centric rivals.

“The PC lifecycle is getting longer, in part because of device maturity and in part because PCs are being substituted by mobile devices for some tasks,” said Ezra Gottheil, TBR’s Computing Practice principal analyst. “PCs remain essential, powerful tools for consumers and enterprises, but PC vendors will need to aggressively innovate, refreshing their product lines with touch-screen functionality, to deflect competition from increasingly capable mobile devices.”

Windows 8 tablets, especially convertible tablet PCs and PCs with detachable touch screens targeted at enterprise users, will combat reduced spending, reigniting enterprise demand.

Enterprise deployments of Windows 8 tablets and tablet-PC hybrids will produce a ripple effect into consumer markets, remedying a two-year decline in PC unit shipments by allowing consumers and enterprises to use familiar Windows software, security controls and legacy peripherals and connectivity — key differentiators against compatibility with traditional business, limited content-creation capabilities and security controls in most Android devices and Apple’s iPad.

Alternative Operating Systems Provide an Opportunity

PC unit shipments and revenues in 4Q12 fell 12.8 percent and 14.4 percent year-to-year, respectively, as the marketplace continued to defer purchases of new PCs. PCs remain the hub of many consumer and employee computing activities, but purchases of secondary and tertiary PCs are being delayed as a result of Windows, lost through attrition to tablets or a combination of the two. With a wider range of devices to present to customers, PC vendors can rebuild their presence in consumer markets and parry attempts by mobile-centric rivals to claim larger shares of market and revenues.

Android devices such as HP’s Slate 7 tablet and Chromebooks from HP, Lenovo, Acer and Samsung are not indicators these Windows OEMs are moving away en masse from Microsoft’s operating system. In fact, despite a 12.8 percent unit shipment decline in 4Q12, Windows will remain the de facto OS for the large majority of customer devices. However, as social media, cloud, big data and mobile devices arc across multiple technology and product categories, companies with a stable of devices that support alternative operating systems are positioned to capitalize on demand for devices integrated into those ecosystems.

As Android and Chrome OS devices gain traction in the marketplace, Windows OEMs will fold them into their overall computing value proposition, and in similar fashion to their traditional PC counterparts, additional hardware and software capabilities will be layered into the devices to differentiate them from rival offerings.

Low-Cost Devices Fuel Android’s Market Share Gains

The growth of smartphone and tablet markets continued to skyrocket, especially in China and India, arguably the world’s largest mobile marketplaces. Android OEMs remained on the offensive in 4Q12, driving down pricing to below $80 — nearly that of feature phones — to take advantage of opportunities to win significant portions of rival customer bases of struggling platforms such as BlackBerry and Windows Phone. In 4Q12 smartphones comprised an estimated 45.5% of the global handset market, and as demand for the devices in China and India increases in tandem with the availability of low-cost Android smartphones, TBR believes sales of smartphones will eclipse feature phones for the first time in 2013.

The top five benchmark Android OEMs — Samsung, Huawei, ZTE, Lenovo and LG — boosted their cumulative unit shipments an average of 109.1 percent year-to-year in 4Q12, with their broad product portfolios at all price bands filling gaps in the primarily high- or low-end Motorola, BlackBerry and Nokia lineups. A triple-digit annual increase in sales of the iPhone in China drove Apple’s APAC revenues up 34.6 percent year-to-year to a record $16 billion in 4Q12. TBR expects emerging markets will be an ongoing focus for OEMs and Apple through the rest of the decade as these feature phone-heavy markets eventually migrate to more expensive smartphones.

Overall tablet revenue climbed 20.4 percent year-to-year in 4Q12 as lower-cost 7- and 8-inch tablets from Android OEMs and Apple rapidly took over the marketplace. The introduction of the iPad mini gives consumers a lower-priced option for a secondary Apple device, while effectively competing against the pioneering Google Nexus 7 and Amazon’s Kindle Fire. While the number of lower-priced, smaller tablets will continue to accelerate in 2013, surpassing Apple’s overall market share by 3Q13, Apple will remain the market’s juggernaut.

Bolstered by the introduction of the iPad mini and the continued popularity of the 10-inch iPad, Apple’s 4Q12 tablet revenues of $10.6 billion and gross profit of $2.5 billion were five times and 10 times that of the next 12 tablet vendors combined, respectively.

Windows 8 tablets, especially the Pro, aim to bridge the technology gap between consumer-grade full-size and mini tablets, but remain a wildcard in the tablet marketplace. “Apple, Android and Amazon will continue to maintain strong footholds,” said Gottheil. “But over the long term, vendors with traditional PC strength will be validated by users expecting tablets to have PC functionality.” However, the value proposition and market advancement of Windows 8 tablets is threatened by Samsung’s SAFE and Knox enterprise security initiatives, and hampered by Apple’s market dominance. Samsung is aggressively marketing its security technology to tens of millions of Galaxy and Note smartphone users, and Apple’s iPad is a fixture in 94% of the Fortune 500.

Editor’s note: Technology Business Research is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, networking equipment, wireless, portal and professional services vendors. Serving a global clientele, TBR provides timely and accurate market research and business intelligence in a format that is uniquely tailored to clients’ needs. TBR analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.