Apple will displace Hewlett-Packard as the world's leading PC vendor before the second half of 2012, market analysis firm Canalys said.  Since the definition of a PC continues to change with the advent of tablet computers, Canalys decided to lump tablet sales in with PC sales in its report.

Pads, and particularly the iPad, have radically changed the dynamics of the PC industry over the last year, already propelling Apple into second place in the worldwide PC market in Q3 2011, the report said. Canalys estimates full-year 2011 global PC shipments to reach 415 million, up 15 percent year-on-year, thanks predominantly to increasing pad sales.

Canalys, based in Palo Alto, Calif., predicts pad sales will reach 59 million units by the end of 2011. By including tablets with PCs, Amazon and Barnes & Noble become PC players with the Kindle Fire and Nook Tablet, respectively.

iPad shipments in [Apple's] core market - the United States - are likely to come under pressure in Q4 due to the launch of the Fire and Nook at extremely competitive price points, said Tim Coulling, an analyst at Canalys. HP and Apple will fight for top position in Q4, but Apple may have to wait for the release of iPad 3 before it passes HP.

Hewlett-Packard was once a player in the tablet game, but after the company's decision to discontinue its TouchPad tablet amid poor sales in August, the company enjoyed a brief boost from its fire sale of the tablet. HP said at the time that it would spin off its PC business, but since appointing Meg Whitman as the new CEO, the company has decided to keep making PCs.

Hewlett-Packard is still reeling, however. For the fourth quarter ended Oct. 31, HP's net income fell 91 percent, revenue dropped 3 percent, and its shares have tumbled 36 percent this year overall.

We're relatively pessimistic about the economic outlook in two of our three major regions, Whitman said. 2012 just looks tough to me.

Meanwhile, Apple expanded its PC market share from 9 percent to 15 percent in the past year. Non-Apple vendors are struggling to keep up profit-wise, but industry analysts believe the iPad's expensive price tag, which can range from $500 to $830, opens up the door for a cheap substitute.

Seventy-six percent of customers who purchased a non-Apple tablet didn't even consider the iPad, an indication that a large group of consumers are looking for alternatives, and an opportunity for the rest of the market to grow their business, said Stephen Baker, vice president of industry analysis at The NPD Group.

Early projections show Amazon's $199 Kindle Fire may sell 5 million units by the end of 2011, whereas the Nook Tablet, which costs $50 more, hopes to keep pace with its own highly-touted platform.

Despite the emergence of cheaper tablet offerings, Canalys believes Google has the best chance of denting iPad sales with the release of Android's 4.0 mobile operating system, a.k.a. Ice Cream Sandwich, which is expected to appear in Samsung's Galaxy Nexus and several other smartphones in early 2012. Yet, Google's decision to wait until after the holidays to release Ice Cream Sandwich could prove costly.

The release's timing may harm vendors looking to capitalize on strong holiday season sales, the report said. Much of the IT channel's stock now runs on older versions of Android 3.1, and many vendors are not forthcoming with upgrade timescales, which will deter informed customers.

Considering the vast popularity of the Android platform, vendors of Android-based tablets may see their profits increase in 2012. In the first 10 months of 2011, non-Apple tablets in the U.S. sold only about 1.2 million units combined. By that same measure, Apple sold more than 25 million iPads in the first three quarters, and 11.1 million iPads in the last quarter alone.

Canalys expects overall PC sales to drop in 2012 due to the global economic crises.

Western Europe is largely responsible for the regional decline because of investor concerns over sovereign debt issues in the Euro Zone, the report said. As with the U.S. market, ongoing economic issues will continue to have a negative impact on consumer confidence levels, affecting shipments in Q4 and beyond.

Flooding in Thailand, which is responsible for roughly 45 percent of the world's hard disk production, will cause further business disruption, which will in turn lead to higher prices, reduced inventories and diminished shipments of desktops, netbooks and notebooks. The side effects of these hard drive shortages, Canalys believes, will drive solid-state drive (SSD) production and effectively lower prices of devices that use these drives, including tablets, the Lenovo ThinkPad X300 and Apple's MacBook Air.