Why PC Sales Are In Free Fall

The latest IDC report has some alarming news for Microsoft and the PC industry. Personal Computer sales are in free fall due to lack of hardware and software innovation. Not only has Microsoft Windows 8 failed to save the PC industry, the hated operating system (OS) has actually harmed PC sales. The PC industry has its share of blame with the failed tablet launch.

First we had Microsoft's misguided Windows RT and Surface tablets strategy. When I warned these products were failures, I got flak from Microsoft defenders that the products haven't even launched and that I couldn't possibly judge so soon. But my assessments were based on fundamental flaws in the products. Windows RT was a version of Windows that couldn't run existing Windows Applications. It also hinged on a nascent Windows Modern UI (formerly "Metro") App Store that is still struggling for relevance half a year after Windows 8 launch.

The Surface tablet based on the NVIDIA Tegra 3 and Windows RT was supposed to offer superior battery life to an Intel based tablet as a concession prize for the lack of Windows application support, but it ended up being less battery efficient and lower performance than Intel tablets. Despite having inferior specifications to the iPad 2 and third and fourth generation iPad, Microsoft had the nerve to ask for a higher price and higher profit margin than Apple. Not surprisingly, Surface sales are embarrassing. As for the "Pro" version of the Surface Tablet, my predictions about its poor battery life were accurate because Microsoft used a notebook processor that was never designed to have the battery life necessary for a tablet. Microsoft apparently never consulted Intel about hardware.

If the Windows RT fiasco wasn't bad enough, Microsoft even managed to make people hate Windows 8 despite its promising capability. A friend of mine said that Microsoft's slogan for Windows 8 should be "touch everywhere, even when inappropriate". Windows 8 is supposed to be optimized for tablets and the traditional PC but it runs neither hardware platforms well. On the PC desktop or notebook side where touch isn't enabled, Microsoft forces users to use a touch optimized user interface.

On Windows 8 tablet devices, basic functionality still doesn't work 6 months after the OS launched. Modern Apps can't easily see additional storage volumes like the MicroSD card. You have to resort to some crazy hack like mounting an NTFS storage volume into a folder which can cause problems when you try to image the file system for backup.

If things weren't bad enough with Microsoft stealing all the media limelight with its failed Surface tablets and a poorly designed Windows 8 OS, the PC industry made things worse by launching buggy and overpriced hardware. Device driver problems delayed Intel Clover Trail based Tablets by two months and the hardware was disappointing. Apple and Google were already releasing tablets for $499 and $399 with ultrahigh display resolutions of 2048x1536 and 2560x1600. The PC industry still believes it can sell tablets with 1366x768 resolution for $599-$799.

The PC industry is a classic example of an incumbent that got lazy and became obsolete. There was virtually zero competition 6 years ago when PC sales were riding high and Apple barely registered in computer market share. The PC industry could depend on Microsoft to produce bloated slowware like Windows Vista and a crapware induced bit rot to force people to upgrade to new PCs every few years even though there was nothing wrong with the actual hardware.

While PC display resolution froze and TN LCD panels with crappy viewing angles were the norm, smartphones and tablets pushed ahead with super wide viewing angles with ultrahigh resolution OLED and IPS panels. While the PC industry pushed UI response times to 15 seconds with bloated Java code, Apple and Google pushed UI response times down to sub 200 milliseconds.

It has never been clearer that the survival of the PC is in question and that time is running out. Windows 8 and the tablets that launched with it clearly failed to save the PC industry. What's needed is some genuine hardware innovation at a competitive price point. There's rumors of Microsoft working on a 7-inch tablet which might help if it has competitive hardware specs with Google's Nexus 7 at a $199 price point. Google isn't standing still and there's a good chance that we'll see another generation of a hot new Android tablet before Microsoft launches.

We will likely be seeing touch-enabled Intel Haswell-based Ultrabooks with Windows 8.1 (code named "Blue") by the fall of 2013 with a starting price of $599. Since Haswell will have always-on tablet-like battery life, Microsoft needs to deliver a much improved experience with Windows 8.1. This will help slow or halt the decline of notebook sales but Microsoft still needs a solid Windows 8.1 tablet solution.

Microsoft and/or the PC makers need to produce an ultrahigh resolution tablet with a starting price of $399 running Windows 8.1 "Blue". To help hit these prices, they need to emulate the strategy of Apple and Google by adopting the no storage expansion strategy unless users buy a $150 battery/keyboard dock. They could also use a Windows 8.1 7" or 8" tablet with 1080P resolution for $299.

If the PC makers won't deliver something like this, Microsoft should try to emulate Google's Nexus strategy. Microsoft would set hardware requirements and pricing and ask a PC maker to step up to the plate. The winning bid would get Microsoft's backing on branding and advertising. There's still plenty of money to be made with hardware accessories and the overall profit margins will be better than the typical sub $400 PC notebook. If Microsoft wants to be relevant in the tablet space, this is their only hope.