Pre-Windows 8, PC Sales Worse Than Expected

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That the PC market is in decline is no secret. But separate reports released this week by Gartner, IDC, and IHS iSuppli assert that the downward trend is even more pronounced than originally anticipated. IHS iSuppli said 2012 will be the industry's first year-over-year drop in units shipped since the dot-com bust took its toll 11 years ago.

The contraction was caused by a variety of factors, ranging from the growing popularity of smartphones and tablets to economic concerns to the fact that many enterprises are midway through refresh cycles.

Still, the faltering numbers might not endure, with Windows 8 set to launch on October 26, there's still hope for a late Q4 turnaround.

IHS iSuppli's analysis projects that the total PC market will recede by 1.2% relative to 2011, declining from 352.8 million units shipped to 348.7 million. Gartner and IDC each focused on Q3, rather than the entire fiscal year, but the firms' respective conclusions support that the market is depressed: Gartner declared an 8.3% year-over-year decline in PCs shipped during Q3, whereas IDC pegged contraction over the same period at 8.6%. IDC noted that it had expected a 3.8% decline.

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Drops in the U.S. were even steeper than those of the global marketplace--13.8% according to Gartner, and 12.4% according to IDC.

Gartner principal analyst Mikako Kitagawa cited weak consumer demand as one factor in the slowdown, mentioning that back-to-school sales, normally a boost to Q3 numbers, were relatively anemic. She also said in a statement that the impending release of Windows 8 deterred additional shipments, with priorities instead focused on liquidating existing inventory.

IDC research director David Daoud said in a statement that "innovative new products and designs"--such as the touch-enabled PCs and hybrid form factors that OEMs have been touting throughout the Windows 8 lead-up--could motivate consumers toward the end of Q4. This means, he said, "a potential return to positive growth at the end of this year."

Among individual manufacturers, Lenovo emerged as the big winner. Gartner said the company led the industry for the first time, capturing 15.7% of the worldwide market in Q3 and boosting its shipments by almost 10% year-over-year. The research firm found that HP ranked second, the first time in six years that the computing giant has not led the field. According to Gartner's figures, the ailing vendor not only lost almost 9% of its market share to finish with 15.5% but also suffered a 16.4% decline in units shipped. IDC, in slight contrast, said Lenovo placed second during Q3, claiming the Chinese company's 15.7% share trailed HP's 15.9%.

The discrepancy stems from different accounting methods, and possibly from the fact that Gartner's numbers are preliminary. Even so, aside from bragging rights, the distinction is a moot point. HP declined in units shipped at almost twice the rate of the overall industry, whereas Lenovo was the only vendor with more than 10% of the market to actually ship more units than it did during the same period in 2011. The two reports pegged Lenovo's expansion in units shipped at around 10%, making its performance, regardless of market position, clearly superior to HP's.

Dell was ranked third in both reports, with a little under 11% of the market. It declined around 14% in units shipped.

In the U.S. market, both firms found that HP led by a comfortable margin, with Gartner reporting a 27% share, down from 28.9% last year, and IDC calculating a 26.1% share, down from 28.2%. HP shipped 20% fewer units, though, so its industry-leading status doesn't mitigate the company's troubles. Second-place Dell captured a little over a fifth of the U.S. market in both reports but also experienced substantial shipping declines. Apple, which did not appear in the global rankings, was third in the domestic race; the Cupertino-based company's market share increased slightly, with Gartner reporting 13.6% and IDC reporting 12.5%, and though Apple's shipments dropped by somewhere between 6% and 7%, its rate of contraction was less than that of the overall market. Potential global champion Lenovo finished fourth in the U.S., with Gartner citing a 7.3% share and IDC citing an 8.3% share. Lenovo managed not only to improve its slice of the market but also to ship more machines; Gartner's figure represents a 6.1% uptick in units shipped, whereas IDC's findings pinpoint the increase at 9.2%.

Gartner attributed Lenovo's success to aggressive pricing and an enterprise focus. The firm cited restructuring efforts as a factor in Dell and HP's respective declines.

IDC's Daoud said that the weak market had been expected because buyers are waiting until Windows 8-based machines are available, a statement that echoes Kitagawa's. He also said "consumers have been looking at alternative devices." This consideration, in addition to the still-fragile economy, likely contributed to slow back-to-school sales: tablets not only deliver much of the functionality for which students once needed PCs but also offer a form factor that will travel easily between classes. Turning to businesses, Daoud suggested that, in addition to Windows 8, economic concerns and the looming elections might have dissuaded companies from buying new PCs.

Though Daoud was at least modestly bullish about the potential for consumer rebounds, Kitagawa said that enterprises are unlikely to immediately adopt Windows 8 PCs. This expectation matches what Gartner VP Dan Blum told InformationWeek in September, when he claimed the new OS's spread into the enterprise would be slowed by "clients amortizing their Windows 7 investment." Jeff Orr, senior practice director for mobile devices at ABI Research, likewise said in an interview that "the enterprise organizations are not first to adopt" Windows 8-based devices, noting that they generally wait until a service pack has been issued, and that the impact of touch capabilities differentiate the new OS from previous refresh campaigns.