PC Market Bleeds: Windows 8 Tablet Fix Needed

IDC and Gartner report the ailing PC market isn't dead, but has suffered profound change. Microsoft must find the right formula for Windows 8 tablets -- perhaps a smaller model.
Microsoft Surface Pro: Is It Right For You?
Microsoft Surface Pro: Is It Right For You?
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The PC market's historic decline only accelerated during the first quarter of 2013, according to separate reports issued Wednesday by research firms Gartner and IDC. The news tightens the screws on Microsoft, which stands to see its empire threatened if it can't respond to consumers' shifting preference for tablets over PCs. The Redmond, Wash., company is reportedly looking to stem the bleeding by pushing 7-inch Windows 8 tablets. The question, as it has been since the Win8 OS stumbled out of the gate last October, is whether customers want what Microsoft is selling.

The reports don't match on all counts, but both IDC and Gartner agree that global PC shipments in Q1 fell below 80 million units. According to IDC, the performance equates to a 13.9% drop, much worse than the 7.7% decline the firm had expected, and represents the worst year-over-year quarterly decline since it began tracking the segment in 1994. Gartner said the market retreated 11.2%, an estimate that is slightly less bleak than IDC's but nonetheless alarming to those heavily invested in the PC's future. Both reports emphasized that the global market has dropped for four consecutive quarters.

Midway through 2012, analysts had still expected the slumping industry to rebound to modest growth. Attitudes changed late in the fall, however, following consumers' lackluster response to Windows 8 and a brutal holiday season in which tablet purchases far outpaced those of traditional computers. Windows 8 adoption has since stagnated, contributing to recent speculation that Microsoft's dominant position could be in jeopardy. Earlier this month, IDC said that by 2017 Android will be running on more connected devices than Windows, which will be fighting with Apple's platforms for second place. Given that Redmond is accustomed to a market in which 90% of PCs run some version of Windows, the implications of such a shake-up are profound.

[ A smaller tablet isn't the big change consumers are looking for. See Windows 8 Tablets: Why Microsoft Must Slash Prices. ]

The newest round of projections blame a variety of factors for the trouble: the high cost of Windows 8 models; the lack of touchscreen-equipped options that maximize the new OS; consumer dissatisfaction with the Windows 8 interface; and the internal struggles of major PC-makers such as HP and Dell.

"At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said IDC analyst Bob O'Donnell in a statement.

That's not to say the traditional PC is dead, however. Gartner found that demand among businesses, while not robust in developed regions, actually increased. Without the support of consumers, though, Microsoft could regress into a role player that dominates certain segments, such as government IT sales, but lacks its current industry-wide clout.

In an interview, Gartner analyst Mikako Kitagawa said there is still consumer demand for PCs, noting that tablets and smartphones are not equipped for content-creation tasks and lack the large screens that users prefer for certain applications. Even so, she stated that mobile devices cover most users' common Web tasks, meaning the PC, though not obsolete, is less essential.

"If you have three PCs in your household, two of them might be replaced by tablets. Only one of them will be replaced with a new PC," she said.

Given this expectation, it makes sense that Microsoft, according to a Wednesday report in the Wall Street Journal, is readying a 7-inch Surface-branded tablet. Redmond's initial Windows 8 plans contained no mention of these smaller devices. But as products such as the iPad Mini have gained popularity, the company has evidently altered its plans; the Windows 8 certification guidelines were changed to allow lower-resolution screens, for example, and rumors of cheap 7-inch tablets have been raging for weeks, even before the most recent rumors.

IDC analyst David Daoud suggested Windows 8 could still make progress, noting in an interview that supply chain issues with touchscreen components contributed to early troubles. The OS offers little benefit, and potentially much frustration, when installed on a traditional PC, he stated, but users who've purchased touch-enabled equipment "feel the OS meets their needs."

It's a problem, he stated, that "a system designed for touch has been used on hardware not designed for touch."

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