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April 10, 2013 at 1:05 PM

PC sales plunge, Microsoft and Windows 8 blamed

Microsoft and Windows 8 are squarely blamed in a new report from top research firm IDC for a startling plunge in PC sales last quarter.

The firm said global PC sales suffered one of their steepest drops in decades over the past three months, the first full quarter since Windows 8 went on sale last fall.

Declines were expected since PC sales have fallen during the past year, and the leading manufacturers are casting about for new strategies. But the severity of the drop was unexpected and Microsoft’s radically new operating system is the most obvious target for blame.

Yet it’s still too early to write the PC’s epitaph. It will take another year or so to see whether Windows 8 is accepted by business users, who drive most PC sales.

The quarterly statistics are also an imperfect gauge of the evolution of the PC beyond laptops and desktops into tablets and other new devices. Research firms have made this more confusing by issuing contradictory reports, using different definitions of what’s a PC.

Gartner, the other major research firm tracking PC sales, simultaneously issued a report saying PC sales fell 11.2 percent during the quarter. It said PC shipments fell below 80 million units for the first time since the second quarter of 2009, in the depth of the recession.

IDC said sales in the U.S. fell 12.7 percent from the same period last year and 18.3 percent from the previous quarter. Global sales were down 13.9 percent, almost double the 7.7 percent drop the firm had predicted.

IDC doesn’t count Windows 8 tablets or laptops with detachable keyboards in its PC count. Research vice president Bob O’Donnell said including them would change the numbers by less than 2 percent.

Gartner’s report said consumers are continuing to “migrate content consumption” from PCs to other devices, such as phones and tablets, leading to a full year of declines in PC shipments. Yet the firm saw growth in business sales of PCs, which account for more than half the market.

Generally, even with the sharply declining numbers, people are still buying a lot of PCs. Gartner said 79.2 million systems were sold last quarter, while IDC said 76.3 million units were sold.

IDC’s report came with an unusually sharp critique of Microsoft and its approach with Windows 8.

“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,” O’Donnell said in the IDC release.  “While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI [user interface], removal of the familiar Start button and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.”

Asked for a response, Microsoft provided a statement saying that the PC market “is evolving and highly dynamic” and that today’s PCs “come in multiple forms” that “revolutionize the desktop PC.”

“Windows 8 sold over 60 million licenses in its first few months — a strong start by any measure,” it said. “Along with our partners we continue to bring even more innovation to market across tablets and PCs.”

HP remained the top PC maker, but Lenovo closed the gap by holding sales steady while HP’s sales fell nearly 24 percent, according to IDC.

Tablets such as Apple’s iPad were partly to blame. Even sales of Apple PCs suffered from competition with iPads, IDC said in its release. O’Donnell said the cycle will continue, as tablets are going to see sales siphoned off by mega-sized phones or phablets.

Still, IDC research found that most consumers aren’t buying tablets to replace PCs, but to supplement their computers. They’re still interested in PCs but the strikingly different tiled interface of Windows 8 and the higher price of touchscreen PCs showcasing the system are keeping them away, O’Donnell said in an interview.

“While people like the general look and feel of the tiles, they’re also very confused and frustrated by the lack of start menu and spend a lot of their time in [traditional] desktop mode,” he said. “So the bottom line is I think they have created a situation where it’s very difficult for people and people who have a PC that works just fine are saying it’s confusing, it costs more money and I don’t really need it.”

O’Donnell said Microsoft isn’t entirely to blame. The economy still isn’t great, sales in China were particularly weak and reorganizations and strategy shifts at top PC vendors Dell and HP have created uncertainty, particularly for business customers.

But he and other IDC researchers believe the Redmond company must make changes to revive the industry built around its software.

“Although IDC had not expected Windows 8 to be a significant driver to help stem the tide of PC volume decline, it now appears that without a course correction from Microsoft, the PC market is headed toward an even worse contraction for 2013 than previously thought,” Jay Chou, senior research analyst on IDC’s quarterly PC tracking service, said in the release.

O’Donnell said he’s suggested to Microsoft that the company give Windows 8 users the option to make the traditional desktop the default setting, and restore the old fashioned “start” button, but he’s not counting on a change.

“I think this is the pride before the fall – because they are unwilling to make those changes, because it would show them as having given up or lost on their radical new vision,” he said.

Here is IDC’s ranking of the top PC vendors last quarter:

IDC q113

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