PC sales fall 11% – Why and what is going on with the PC market?

A recent Gartner report says PC sales fell 10.9% in quarter two.

Worldwide PC shipments dropped to 76 million units in the second quarter of 2013, a 10.9 percent decrease from the same period last year, according to preliminary results by Gartner, Inc. This marks the fifth consecutive quarter of declining shipments, which is the longest duration of decline in the PC market’s history.

All regions showed a decline compared to a year ago. The fall in the Asia/Pacific PC market continued, showing five consecutive quarters of the shipment decline, while the EMEA PC market registered two consecutive quarters of double-digit decline.

See http://www.gartner.com/newsroom/id/2544115

That’s not good at all. However it is better that Q1 when sales fell 11.2%, so a slight improvement in the rate of fall.

Gartner says tablets are killing the PC market, not Windows 8: “We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets.” We think that Windows 8 has made a negative impact. Take a look at this graph from BI.

chart-of-the-day-pc-industrySince the release of Win 8 last year PC sales have tumbled. Dell is stuck with infighting about taking the company private.

This compares with Apple iPad sales. In the last quarter Apple shipped 20 million units up over 65% year on year. This quarter includes the iPad mini which has helped Apple ramp volume production.

Even at a zero growth rate that equates to a yearly run rate of 80 million units, a number that surpasses the entire PC industry. Apple will give us an update at the next quarters release in a two weeks time.

This is without doubt the main reason the PC is tanking. Mobile users are just not buying laptops they are buying iPad and desktop users are replacing aging PC as they break and die with new machines. As PCs sold over the last say 5 years are still pretty decent and give a solid performance with Windows 7 they see no compelling need to move to Win 8. And why should they. There are very few, if any applications that demand Win 8, Windows 7 works fine and Windows 8 have caused confusion with end users who have clamoured for their favourite Start Button.

The next big battle will be the use of Microsoft Office. Looking at the Apple app store it is clear that the Apple office products, Pages and Numbers are selling in huge numbers. Apple showed the next cloud release of these products at WWDC and we can expect full versions later this year. While we don’t yet know pricing we do know that once users start to play with Pages and Numbers their need for Microsoft Office reduces. This is the thin end of the Office wedge that drives a substantial part of Microsoft profit and more importantly lock on the entire PC industry.

Microsoft are only too aware of this and the recent release of Office for iPhone is a token response and is a pretty shoddy product in any event. They are caught between the rock and the hard stuff. If Microsoft make Office for iPad they risk losing even more PC sales further reducing Windows and Windows Office sales. If they don’t release they drive more people to try Pages and Numbers. The current strategy of doing nothing while trying to drum up demand for the Microsoft Surface Tablet is possibly their best bet. Again Microsoft has confused the market with two distinct Tablet products, one with full Windows 8 and one without Windows 8, yet called Windows 8RT.

Interesting times to be a Microsoft partner.

One thought on “PC sales fall 11% – Why and what is going on with the PC market?

  1. taybridge

    Microsoft reported results last night: It’s a big miss due to the collapse of the PC market.

    EPS is $0.59, versus expectations of $0.75.

    In the release, Microsoft says it’s taking a $900 million charge, or a $0.07 per share impact, due to the Surface RT inventory adjustments.

    If don’t include the RT charge, then its EPS is $0.66, which is still a very big miss.

    Revenue is $19.9 billion versus expectations of $20.72 billion.

    The stock is down 4.85% after-market.

    – Short position closed.

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