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PC outlook darkens as sales slump deepens in Q1

According to International Data Corp (IDC), first-quarter shipments of PCs fell 14 per cent worldwide from the same time last year.

twitter-logo Associated Press   San Francisco     Last Updated: April 11, 2013  | 11:16 IST

The ailing personal computer market is getting weaker, and it's starting to look as if it will never fully recover as a new generation of mobile devices reshapes the way people use technology.

The latest evidence of the PC's infirmity emerged on Wednesday with the release of two somber reports showing unprecedented declines in sales of desktop and laptop machines during the first three months of the year.

According to International Data Corp (IDC), first-quarter shipments of PCs fell 14 per cent worldwide from the same time last year. That's the deepest quarterly drop since the firm started tracking the industry in 1994. Another research firm, Gartner Inc, pegged the first-quarter decline at 11 per cent.

The deviation stemmed in part from the firms' slightly different definitions of PCs.

No matter how things are parsed, the PC market is in the worst shape since IBM Corp released a desktop machine in 1981. PC sales have now fallen from their year-ago levels in four consecutive quarters, a slide that has been accelerating even amid signs that the overall economy is getting healthier.

"This is horrific news for PCs," said BGC Financial analyst Colin Gillis. "It's all about mobile computing now. We have definitely reached the tipping point."

As if the news wasn't troubling enough, it appears that a pivotal makeover of Microsoft's ubiquitous Windows operating system seems to have done more harm than good since the software was released last October.

Microsoft Corp CEO Steve Ballmer thought he had come up with a tonic last fall when his company released a radical new version of Windows last fall. Windows 8 has a completely new look that's similar to the design of the software running the most popular smartphones and tablet computers. The overhaul requires a relearning process, a leap that many consumers and corporate buyers aren't ready to take.

All signs so far point to Windows 8 being a flop.

"Unfortunately, it seems clear that the Windows 8 launch not only didn't provide a positive boost to the PC market, but appears to have slowed the market," IDC Vice President Bob O'Donnell said.

The newest version of Windows is designed to work well with touch-sensitive screens, but the displays add to the cost of a PC. Together, the changes and higher prices "have made PCs a less attractive alternative to dedicated tablets and other competitive devices," O'Donnell said.

In a statement, Microsoft had described the PC market as "evolving and highly dynamic". Referring to a number that it has previously released, the company said it has sold more than 60 million copies of Windows 8 so far. That is "a strong start by any measure," Microsoft said. "Along with our partners we continue to bring even more innovation to market across tablets and PCs".

The traditional PC, however, still has a long way to go before it becomes obsolete. Despite the dismaying start in the first quarter, more than 300 million PCs are still expected to be sold worldwide this year.

Tablet computers, a category that was insignificant until the iPad came along, is catching up rapidly: Nearly 200 million of those devices could be sold this year. Meanwhile, worldwide smartphone sales could surpass 1 billion units this year.

But the companies most threatened by the mobile upheaval are those that depend on PCs to make most of their money. This group includes technology heavyweights such as Windows maker Microsoft, PC makers Hewlett-Packard Co. and Dell Inc. and PC chip maker Intel Corp.

In its tally, IDC excludes tablets, even if they run PC-style software. It also excludes any device that has a detachable keyboard. With the release of Windows 8, PC makers have been reviving their experiments with tablet-laptop hybrids, some of which have detachable keyboards.

Consumers are likely to have shifted some of their buying away from traditional laptops and toward these new devices, which means that the total sales decline of Windows-based devices might not be quite as drastic as IDC's numbers suggest.

Windows 8's poor sales start could amplify periodic calls for Microsoft to replace Ballmer, who replaced company co-founder Bill Gates as CEO nearly 13 years ago.

Washington-based Microsoft will take questions from industry analysts on April 18 when it's scheduled to release its latest quarterly results. Ballmer usually doesn't participate in those sessions.

Microsoft shares fell 55 cents, or nearly 2 per cent, to $29.73 in extended trading, after the release of the sales reports.

Hewlett-Packard, the world's largest PC maker, saw a 24 per cent drop in shipments in the first quarter compared with the same period a year ago. That was HP's steepest quarterly decline since the company bought rival PC maker Compaq a decade ago.

HP shares fell 60 cents, or 2.7 per cent, to $21.72 in extended trading.

Meanwhile, the industry's No. 2, China's Lenovo Group, is benefiting from sales to first-time buyers in China and other developing countries. As a result, it held sales steady, alone among the world's top 5 PC makers, according to IDC's figures.

Dell Inc, the third-largest PC maker, suffered an 11 per cent decline in the quarter. The bad news could be helpful to Texas company's attempts to sell itself for $24.4 billion to a group that includes CEO Michael Dell.

Dell's stock dipped a penny in extended trading to $14.20.

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