Infrastructure // PC & Servers
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4/14/2011
12:57 PM
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PC Sales Tumble As Consumers, Workers Eye Tablets

New market data shows that the iPad and Android-powered slates may be taking a bigger bite of the PC market than expected.

The worldwide market for personal computers unexpectedly contracted for the first time in six quarters in the face of stiff competition from trendy tablet-style devices, according to new data from market watchers. The numbers confirm for the first time what many in the industry already suspected—that Apple's iPad and Google Android-powered tablets are seriously disrupting the Windows PC market.

Gartner said global PC sales declined 1.1% year over year in the first quarter, while IDC, which uses a different methodology, saw a falloff of 3.2%. Analysts at both firms said users' embrace of new, tablet-style devices was the major reason for the drop in PC sales.

"Weak demand for consumer PCs was the main inhibitor of growth," said Mikako Kitigawa, principal analyst at Gartner, in a statement. "Low prices for consumer PCs, which had long stimulated growth, no longer attracted buyers. Instead, consumers turned their attention to media tablets and other consumer electronics."

Fueling the PC market's decline is the fact that PCs have changed little in recent years, while tablets offer a sleek, portable form factor that provides an easy on ramp to what consumers use most: the Web, e-mail, and social media apps.

"Macroeconomic forces can explain some of the ebb and flow of the PC business, but the real question PC vendors have to think hard about is how to enable a compelling user experience that can justify spending on the added horsepower," said IDC senior research analyst Jay Chou, in a statement.

The news comes as a blow to traditional PC makers like Hewlett-Packard and Dell, and also to Windows developer Microsoft, which is scheduled to report first quarter earnings on April 28.

HP still leads the worldwide PC market with a share that stands at about 18%, but saw shipments decline 2.8% in the quarter according to IDC, or 3.4% according to Gartner. Number two player Dell, whose share stands at about 12%, saw a drop off of 1.8% or 2.2%, according to IDC and Gartner, respectively.

The only major vendors that saw shipments increase during the period were Asian manufacturers Lenovo and Toshiba, both of which took advantage of growth in the Asia-Pacific market.

On the plus side for Microsoft and its OEM partners is the fact that PC sales increased in the business computing market "steadily," according to Gartner. "Without the professional segment growth, the PC market could have experienced one of the worst declines in its recent history," Gartner said.

Still, the corporate IT market may only offer the Windows ecosystem temporary insulation from tablets. An increasing number of workers are bringing the devices they prefer to use at home to the office, and CIOs are backing the trend.

CIOs "are more willing to see that they don't need to supply and manage every device that employees use at work," said Gartner research VP David Willis, in a recent bulletin. "Consumerization is here to stay, and moving very fast. If you can think of an application for tablets, your competition may well be thinking in the same way—and acting on it. It is time to explore the use of media tablets in business."

Microsoft officials insist they have not given up on slates. The Windows 8 family, which could be released any time between October 2011 and October 2012, will include a version that's engineered to run on UK-based ARM's mobile processors, which have become the chip of choice for tablet makers.

In the meantime, the PC market could face more declines as consumers and workers find more uses for tablets and as new models, such as RIM's PlayBook and the iPad 2, emerge.

"With the launch of the iPad 2 in February, more consumers either switched to buying an alternative device, or simply held back from buying PCs," said Gartner's Kitagawa.

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