PC Market Hasn't Hit Rock Bottom Yet - InformationWeek

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5/28/2013
03:06 PM
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PC Market Hasn't Hit Rock Bottom Yet

PCs are in even worse shape than expected, says IDC, but that's not necessarily bad news for Windows 8.

Tablet Buying Demystified: 10 Tips
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Tablet Buying Demystified: 10 Tips
IDC reported Tuesday that the PC market, already known to be hemorrhaging cash at a historic rate, is bleeding even more profusely than previously thought. The research firm said consumer preference for tablets has accelerated the damage, noting that the upstart devices are on pace to outsell laptops by the end of this year.

The new data reinforces that the "post-PC" era is no longer theoretical, and that though traditional desktops and laptops will continue to have a place, tablets and other mobile devices can no longer be dismissed as consumer distractions.

In a statement, IDC announced it now projects PCs will decline 7.8% in 2013, far more severe than the 1.3% drop the firm had previously forecast. IDC expects the decline to continue through at least 2014, after which the market might begin to rebound. Even then, the recovery will be modest; the firm estimates that 333 million units will ship in 2017, well below 2012's notoriously low 349 million.

IDC's data suggests laptops will drive any future PC growth, which will occur mostly in emerging markets. Desktop shipments are expected to decline in all regions for the foreseeable future.

[ Has Windows 8 left you fuming? See 8 Things Microsoft Should Fix In Windows Blue. ]

The newest predictions are the latest in a year-long string of increasingly bleak revisions. Last June, IDC expected worldwide PC shipments to total 413.6 units in 2013. That estimate dropped to 391.1 million in August, though the firm still projected modest growth through 2016. By March of this year, brutal back-to-school and holiday seasons had combined to push 2013 estimates even lower, to 345.8 million units.

In April, it became clear that Q1 PC shipments were even worse than expected, setting the stage for IDC's newest prognostications.

The takeaway? PCs aren't dead, but they'll never be as central to most of our lives as they used to be. In a press release announcing the new prediction, IDC VP Loren Loverde stated that most common computing needs -- Web surfing, social media, email, apps -- don't require a lot of processing power or local storage, and that consumers have embraced mobility as a result.

Indeed, in a separate statement, IDC announced Tuesday that it expects tablet shipments to reach 229.3 million units in 2013, a 58.7% increase from last year's 114.5 million. That total would make tablets more popular than either new laptops or desktops are when considered as standalone categories, though not when taken together. By 2015, however, IDC anticipates tablet sales will outnumber the combined sales of all traditional PCs.

Ryan Reith, program manager for IDC's Mobility Trackers, noted in a press release that "PCs will have an important role" but that "a tablet is a simple and elegant solution for core use cases that were previously addressed by the PC."

IDC noted that smaller tablets such as the iPad Mini are becoming more popular. The research firm expects sub-8-inch screens will account for 55% of tablet shipments this year. Larger tablets, a more recent development, could be less impactful, with perhaps only 2% of overall sales.

Significantly, the firm also said that tablet prices will drop 11% this year, to $381, and that PC prices will average $635. Given the disparity, it's easy to see why consumers are choosing tablets. PCs might be more powerful, but they charge a hefty premium for their extra muscle. For a lot of users, especially those with aging-but-functional PCs at home, it makes more sense to buy a cheap, new tablet.

As long as professionals continue writing code, typing reports, using spreadsheets and running software like Photoshop or AutoCAD, businesses and institutions will continue to invest in PCs. But even in verticals that rely on legacy software, tablets have begun to cannibalize traditional machines.

Some schools and universities, for example, have begun to embrace Windows 8-based tablets as laptop replacements, accepting the OS's much-lamented learning curve because the devices combine x86 applications and tablet-style mobility in one slick package. The devices might feature tradeoffs relative to traditional machines, but they've become too functional and economical for certain customers to ignore.

This budget-minded approach won't be right for everyone, but it's somewhat ironic that Windows 8, the OS some blamed for the PC's misfortune, is primed, pending what's included in Windows 8.1, to push tablet sales in new directions.

That, more than anything, is the point the new data reasserts: users have more computing devices to choose from than ever before, and as the new entrants prove their worth, it's natural that no single device will enjoy the virtual monopoly once enjoyed by conventional PCs.

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D. Henschen
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D. Henschen,
User Rank: Author
6/3/2013 | 4:44:03 PM
re: PC Market Hasn't Hit Rock Bottom Yet
I agree with this take. I personally just don't need a new PC, and there's not much Microsoft can do with an operating system to create demand. I didn't see a big difference between XP and Windows 7 (having dodged the Vista bullet), and I probably won't need a new PC until Microsoft comes up with what's next after Windows 8 Blue. I have an 18-month-old tablet, too, and don't see a need for the latest and greatest.

You have to show real value to get people to upgrade. It's time to get real about rampant consumerism. We're not going back to 2006.
Michael Endler
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Michael Endler,
User Rank: Author
5/29/2013 | 3:07:09 PM
re: PC Market Hasn't Hit Rock Bottom Yet
Thank for the comment, jabberwolf. I appreciate you playing devil's advocate, but could you cite the sources for your data? I don't think the sales figures you offered were correct.

Specifically:

HP's stock is way up this year, but the company spent most of last year laying people off and reshuffling its divisions, actions that drove the stock down. HP's PC sales - according to their own earnings, not analyst estimates - have neither "climbed" nor led to the Wall Street gains.

Similarly, Dell enjoyed a stock bounce earlier this year, but that had little to do with PCs; rather, investor interest increased due largely to Michael Dell's buyout proposal, and the possibility that higher prices would encourage better bids. The stock rally actually fell off a cliff as it became clear that the PC market's decline will continue for the foreseeable future. According to Dell's recent earnings, the company has made progress in its enterprise divisions but its PC business was a major reason for profit loss. Dell is diversifying but it's still very reliant on a weak PC market-- that's why the stock DROPPED, not why it briefly surged.

Microsoft, meanwhile, has enjoyed a stock resurgence IN SPITE of Windows 8, not because of it. When Microsoft most recently announced earnings, Windows revenue, once deferred income was removed, was essentially flat. That's not bad, considering how much grief the company received over Windows 8, but given that much of that revenue ostensibly came from Windows 7 migrations, it's not great news either. Wall Street has been more bullish on Microsoft lately, but that's not because of Windows; it's because of Azure, Office 365, and the other multi-billion dollar revenue streams that Redmond recently established.

Apple, meanwhile, is still worth more than just about any other two tech companies COMBINED. "Gone down" seems excessive. Investors probably overvalued Apple when its stock was above $700, but Apple's recent drops have only a little to do with corrective measures by shareholders; a lot of it also has to do with short-term hedges, and the general tendency for investors to hold any given stock for less and less time. Apple has actually weathered the rough PC market better than most PC makers (Lenovo being a notable exception), somewhat supporting Tim Cook's contention that iPads are cannibalizing PCs more than Macs. Apple might experience its first decline in iPad shipments this quarter, but that has a lot to do with refresh cycles and timing, not necessarily a lack of consumer enthusiasm. By the end of the year, Apple will still likely have sold more tablets and computers than it did last year. The tablet market will likely grow faster than Apple does, which will lead to market share losses-- but it's hard to characterize Apple as a company on the way down. And that doesn't even address the potential of new products. If the company scores with a new tech (wearable tech, TVs, whatever), the recent Apple criticisms will look downright myopic.

As for the Chromebook being a flop... well, I think it's been about as successful as could have hoped to be, given that Internet connections aren't ubiquitous enough to make such a cloud-tethered product a real contender. But it's an experiment that points toward the future, and eventually Chromebook-like technology will have a place. Anyhow, the success or failure of Chromebooks has little to do with how Google makes its money, or whether its main OS - Android - ends up, as analysts predict, installed on more machines than Windows by 2017.

Finally, as for a "little bit" of "downward sales," you might have a point. The economy certainly encouraged consumers to consider tablets last year, rather than costly new computers. But there's much more evidence to support a shift in preference toward tablets than to suggest consumers were simply waiting for financial conditions to improve. Indeed, there's evidence that the most affluent customers prefer Apple anyway. It's possible the PC slump won't end up being as severe as people expect, but the decline has been unprecedented in both scope and speed, so while PCs will continue to sell in great numbers, I don't think "little bit" does the phenomenon justice.
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