Microsoft’s recent purchase of Nokia affirmed the company’s entry into the hardware business, which now forms a core component of its “devices and services” strategy. That journey began with entertainment devices (like the market-leading Xbox and the now-defunct Zune), continued with the Surface and Surface Pro Windows 8 devices, and reaches its logical conclusion with all of Nokia’s smartphones.

Microsoft’s move cements and validates a number of trends in the computing industry:

  • All the major platform players have gotten into hardware. Apple is of course the most vertically integrated platform player, creating hardware, operating systems, and software for its ecosystem. Google is in the hardware game too, having acquired Motorola in 2011, partnering to produce Nexus 4, 7, and 10 devices, and, most tantalizingly for the future, selling Google Glass. Amazon makes its Kindle and Kindle Fire HD devices, which are tightly coupled with its content and services. Even Facebook tentatively experimented with hardware in its collaboration with HTC on a Facebook Home phone.
  • Traditional PC form factors are not sustaining sales… Companies that track supply-side shipments report that the traditional PC market as contracting, while tablets represent the fastest-growing category. Forrester’s own forecast of the business and consumer tablet market shows incredible growth through 2017, reaching a majority of US online consumers. The PC certainly isn’t dead, but its relative power is dimming in favor of newer form factors.
  • …prompting PC OEMs to diversify away from the PC market. Although the attempt was aborted, Hewlett-Packard flirted with the idea of selling or spinning off its entire PC division under then-CEO Léo Apotheker in 2011. Dell has continued to position itself as an end-to-end enterprise solutions company, growing its businesses in security, software, storage, cloud, and services. Lenovo is making a concerted push into mobile devices, describing its strategy as “PC plus.” Acer recently indicated it will specifically diversify away from Windows into devices based on Android and Chrome OS.

What do these trends portend for the future? In the next few years, we’ll see:

  • A single market for mobile devices and PCs. The distinction has been growing thin for years, but the mix of players will blend together further. Samsung is the paradigmatic company here: Neither strictly a “mobile handset maker” nor a “PC maker,” the vendor offers a variety of devices across all segments – smartphones, miniature tablets, traditional tablets, and PCs.
  • Consolidation among hardware players. Not every PC OEM will adapt to this blended market; some will fail to compete. Their hardware businesses will be sold to larger players who can attain scale. Oh, and given the duopoly of hardware profits in the smartphone market, the handset makers won’t be immune; other smartphone OEMs will face acquisition or dissolution.
  • More vertical integration by ecosystem players. Perhaps inspired by Apple’s span of control over its products (and, hence, over the user experience of those products), other players will continue to move in this direction too. How far they go becomes a key question. Could Microsoft purchase a major PC OEM some day? Possibly, though it won’t happen immediately. Will Google tighten up its rein on Android? Probably only a bit more than it already has. But if Google Glass goes mass market, it will be an OEM in its own right on that product.

Looking back to 2007 – a time when Nokia’s market cap exceeded $100 billion and sold 4 out of 10 phones globally – it was hard to envision that the market would change so radically in 6 years. In the next 6 years, the PC and smartphone OEM landscape will change even more.

J. P. Gownder is a vice president and principal analyst at Forrester Research serving Infrastructure & Operations Professionals. Follow him on Twitter at @jgownder.