What's behind the slump in PC sales? Can the industry turn around?

What's behind the slump in PC sales? Can the industry turn around?

Summary: PC makers who were hoping for Windows 8 to kick off a surge in sales have been disappointed. Apparently, no one climbed on Santa's lap and asked for a new PC. The real question now is whether the industry can grind out acceptable results over the next year as it redefines what a PC is.

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PCs are for work, tablets are for fun.

That is all the economic analysis you need to understand why PC sales in the fourth quarter of 2012 have been lackluster.

No one climbed on Santa's lap and asked for a new laptop. They wanted a Kindle or an iPad, or maybe even a cheap Android tablet, all of which cost less than a PC and are easier to wrap.

The latest data point for PC sales comes from Fujitsu, a third-tier PC maker, whose president told reporters in Tokyo that the company will miss its target for annual PC sales. Bloomberg BusinessWeek reported the remarks and prominently blamed "slow demand" for Windows 8.

Initial appetite for the software, introduced in October, is “weak,” Fujitsu President Masami Yamamoto, 58, told reporters in Tokyo yesterday. Slumping demand in Europe amid the sovereign-debt crisis will also erode sales, he said. PC deliveries for the year ending March 31 may be more than 6 million units, compared with an October estimate of 7 million, he said.

Reuters, which covered the same story, wrote a very different opener:

Dec 27 (Reuters) - Fujitsu Ltd is likely to miss its personal computer sales target this year due to sluggish demand in crisis-hit Europe as well as a backlash against Japanese products over regional tensions with China.

Fujitsu president Masami Yamamoto told reporters the firm, which makes micro chips, smartphones and computers, was likely to miss its target to sell 7 million PCs this fiscal year to March, predicting sales of between 6 and 7 million.

Fujitsu isn't a very good proxy for the PC market as a whole. Its PC manufacturing business has been in decline for years, and its emphasis on European markets has been particularly unfortunate as that region has struggled economically to deal with economic collapse in Greece, Spain, Italy, and a general slowdown elsewhere.

Meanwhile, two of the top three PC makers appear to be holding their own. In its most recent results, Lenovo bucked overall market trends and reported an increase in sales: "During the company’s fiscal second quarter ending on Sept. 30, Lenovo reported that its PC shipments grew year-over year by 10.3 percent."

And then there's Dell, which appears to have stabilized its PC business by focusing more on small business and less on fickle consumers. Interestingly, the same Bloomberg story that focused on Fujitsu buried these comments from CEO Michael Dell near the end of the story:

Dell Inc., the world’s third-largest PC maker, said Dec. 12 it’s seeing strong demand for computers and tablets running Windows 8. Interest in the operating system is “quite high,” Dell Chief Executive Officer Michael Dell said at a conference in Austin, Texas.

(The third member of the top three, HP, is a basket case, with major problems in its business, a revolving door in the CEO suite, and a schizophrenic approach to the PC market. No wonder its PC sales are down 16% year over year.)

PC makers who were hoping a for a pop in sales with the launch of Windows 8 were disappointed. Emmanuel Fromont, president of the Americas division of Acer, told The New York Times, “There was not a huge spark in the market” and said his company's Windows 8 PCs were off to "a slow start, there’s no question.”

The latest web usage statistics from Net Market Share bear out that conclusion. Usage of Windows 8 has increased steadily since its launch, relative to other versions, but there hasn't been a spike. Here are the latest numbers, collected this morning and current through December 30, 2012:

windows-version-net-market-share-end-2012

That's a steady gain for Windows 8 every week since its launch, with a bigger bump in the week beginning December 23, which included Christmas Day. (For a discussion of last month's numbers, see "How are Windows 8 sales? Still too early to tell.")

The reality is that anyone expecting a new Windows version to deliver a big bump in PC sales is living in the past. PCs aren't sexy consumer goods, and they're too expensive to be high-volume gifts. Although the conventional wisdom is that PC makers have to deliver their goods in time for "the crucial holiday buying season," the reality is that PC buying happens all year long. In a tough economy (especially so in Europe) businesses and consumers are buying PCs when they have to, and making existing PCs last longer.

So a PC that might previously have been replaced after three or four years is being pressed to last an extra year or even two. If the average lifespan of a PC goes from four to five years, that's the equivalent of a 20 percent annual drop in sales, which is unwelcome news to PC makers who were hoping, unrealistically, for a magical increase in demand in a weak global economy.

The most likely economic scenario? The PC industry will grind out sales over the next year at a slower clip than the previous year, led by businesses rather than by consumer demand. If sales are down 20 percent (probably a worst-case scenario) that's still more than 200 million new Windows PCs that will be on the market a year from now, with most of them running Windows 8. At some point, that plodding growth will result in an installed base that's too big for developers to ignore.

The real question is whether Microsoft and its OEM partners can expand beyond their traditional market by delivering Windows 8-powered gadgets that don't look like PCs or have PC-like price tags. The Surface, Microsoft's first attempt to crack that market, hasn't been a box office success, but it did succeed in proving that a device running Windows doesn't have to look like a gray clamshell or a black tower.

Microsoft's Surface Pro is due in January, and there's evidence to suggest that more products will appear under the Surface brand name later in the year. Here's what I wrote last summer, after digging into Microsoft's public SEC filings to uncover its radical new business plan:

I would be shocked if we don’t see more PC hardware from Microsoft in the next 12 months.

Deal with it, OEMs.

Microsoft plans to pick up the pace. Dramatically.

PC makers who are willing to settle for incremental changes in the same old boring product lines can expect to suffer the same fate as Fujitsu, sliding slowly into irrelevancy. Between now and the next "crucial holiday buying season," it's imperative that PC makers who want to avoid that fate put together product lineups that aren't so, you know, PC-like.

Topics: PCs, Windows 8, Windows 8 in Business

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134 comments
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  • Fujitsu has no right to complain about windows 8

    Highly satisfied Fujitsu customer here.

    when I was looking for a new windows 8 computer, I went on their site, and I looked at their selection. EVERY single computer they offer was designed for windows 7! Goddamnit, they are still trying to sell tablets with windows 7!

    this is a joke!
    the_tyrant
    • The Upgrade Market ?

      Before W8 appearance every Windows based computer was designed for W7 or below. That is an enormous amount of machines out there that would have totally unsuitable hardware for windows 8. W8 works with a touch screen (multi-touch pads are a joke) and an awful lot of w8 machines are being sold without a touch screen.

      W8 is a bit of a frankenGUI that is neither one thing or the other. MS really do deserve a punch on the nose for enforcing tiles on a none touch machine and not allowing a legacy GUI mode. W8 would have been far better received if that were the case.

      It reminds me of the 32bit/16bit mess of ME that was quickly buried.
      Alan Smithie
      • Agreed

        I agree. Windows 8 is a joy on a touchscreen equipped PC, but a real dog on computers that aren't so equipped. Anyone who ships a laptop with Win 8 and a non-touch screen should be made to sit in a corner wearing the "dunce" cap all afternoon. It should be built into the minimum specs for Win 8, and I could honestly see it hurting Microsoft if non-touchscreen enabled PCs are allowed to be sold running Win 8.
        dsf3g
        • Dude....

          It takes like 3.5 seconds to download and install a start button app that replaces the start screen. I actually like the one hosted on ninite better than I liked the windows 7 start button.

          It takes anyone with half a brain roughly 1 hour to get used to using a windows 8 pc. Anyone still complaining after that is probably not qualified to be operating a PC without adult supervision anyways.
          mrefuman
          • So...

            So what you're saying is that Windows 8 on a non-touchscreen device is cool as long as you install UI tweaks that basically turn it into a Windows 7 machine?

            Thanks for making my point for me.
            dsf3g
          • No add on here.

            I've not used any add-ons and I find getting from the new Start Menu to the desktop is cake. (And vice versa.) Also, it's easy to configure the Start Menu to contain most commonly used desktop apps. I agree that the new Start Menu is not needed on a non-touch laptop, but it can be nicely configure so that it does essentially the same thing as the old Start button.
            dprozzo
          • ?

            Sooo you have figured out how to make those crappy live tiles go away, add classic icons to the desktop, have it boot to classic desktop and then be able to scrol top to bottom and not the idiotic right to left??
            Fletchguy
          • So you dont like the tiles?

            We get that.

            Honestly, what was the last version of a Windows computer you purchased for yourself?

            Was it the junky Windows 95? Or perhaps the unruly Windows 98?

            Maybe the barely acceptable Windows 2000 or the horrid Windows Me? Was it the barely tollerable Windows XP or the deeply troubled Vista or did you actually purchase a somewhat livable but imperfect Windows 7 computer?

            Im sure there was nothing good about any of them in your mind, just let us know what was the last one you could actually justfy putting your own money down for?
            Cayble
          • No ding dong.

            You have to have it spelled out?

            If YOU have a problem with an otherwise great OS, there is a simple easy solution to YOUR problem. Many many other report no such problem for themselves.

            You will make note that right here posted under this very article alone there are many who will tell you that your problem is not their problem and Windows 8 works just fine for them.

            We used to hear about the the tech savvy geeks around here who worked in IT for years and years yet they couldnt secure grandma’s Windows computer from simple malware intrusions.

            It was always so odd because my non teck savvy, non geek grand dad could secure a Windows computer. It seemed so odd.

            Now we have the apparent tech savvy geeks who cannot seem to get Windows 8 to work.

            Its amazing. Just amazing.

            Young children can make Windows 8 work great. Someone needs to grow up.

            So many whiners, so little truth.
            Cayble
          • Young children you say.

            I installed Windows 8 for my two boys, aged 5 and 7. They hated it.

            I suppose they were too old to learn anything new as well...
            Bozzer
          • Rubbish...

            If YOU have a problem with an otherwise great OS, there is a simple easy solution to YOUR problem. Many many other report no such problem for themselves.

            We used to hear about the the tech savvy geeks around here who worked in IT for years and years yet they couldnt secure grandma’s Windows computer from simple malware intrusions.
            It was always so odd because my non teck savvy, non geek grand dad could secure a Windows computer. It seemed so odd.
            ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

            Yes, I have a problem with an OS that I spent years perfecting and mastering being taken and completely changed. Yes, I have a problem taking an OS that had true functionality for us so-called "geeks" and turning it into a touchy-feely touch-screen candy toy OS for those who now feel they are superior because they are willing to tolerate whatever garbage gets thrown at them from Redmond. As for that hour, are you speaking about someone like yourself, a home user who has all the time in the world to learn Windows 8 between marathon bouts of Angry Birds and Facebook status updates, or real workers doing real work who have to get a proposal submitted by noon and can't figure out how to even launch Office, let alone use it and don't have an hour to be tutored along with 10,000 other workers by IT on how to use Win 8 Enterprise on a typical workstation? Will you please enlighten me on some of the group policy and backward compatibility issues we're encountering with the toddler friendly Windows 8 since it's so idiot proof and easy?

            As for the second point, I'm glad there are a few people out there who can protect themselves from viruses. I'll be the first to say exactly why THIS particular IT pro can't protect 9 out of 10 users: PEOPLE DON'T LISTEN. Nothing I do, short of destroying a user's computer with a sledge hammer, is going to protect them if after I've removed a few hundred pieces of P2P acquired malware and told them a dozen times not to install the program that caused it in the first place (like the now defunct Limewire), they nod their heads, and re-install it on the newly cleaned machine before I can even get to my car. Their cheap butts just must have that new platinum album or blockbuster movie for free despite the risk. If there are people who exercise safe computing habits, bully for them. However, slamming geeks for not being able to prevent relatives from getting infected is dumb. People are responsible for their own behavior, not the folks who have to bail them out every time they get themselves in trouble.
            mooseboulders
          • ?

            How did you completely remove the windows 8 metro tiles and have it boot to classic desktop? Also does Microsft pay us to have to fix the os to make it usable or is there a rebate when we have to pay for it in a broken state?
            Fletchguy
        • But Microsoft promise us a "no compromise" experience...

          ... were they lying Ed? Were you lying when you said they had nailed it with Windows 8?

          Why do I see Ed Bott in "damage control" mode now that there's another Vista in sight (Vista means view in Spanish by the way)?

          Trust me Ed and Friends. The best selling Windows 8 is Start8, which basically destroys the Windows Store (formerly called Metro) Apps potential.

          If people start booting their Windows 8 machines directly to the desktop, it's bye bye, Surface RT and bye bye multi touch dreams for Microsoft.
          cosuna
          • Interesting interpretation, but horribly out of whack.

            "Why do I see Ed Bott in "damage control" mode now that there's another Vista in sight"

            Because its what you want to see. Your hallucinating.

            Same old story with all you standard bred Windows haters. Just spout something off as if it’s a fact and maybe…just maybe, someone will believe it.

            Nobody except perhaps other haters see Ed in any damage control.

            Conversely, what we do see is the Windows haters spouting of bold statements that are actually vacuous assertions of Windows failures and expecting to make some kind of headway in the haters club.

            Its not the people using and enjoying Windows 8 we see in any panic modes, what we do see almost without stop around here is the Windows haters club in absolute panic mode saying crazy nonsensical things as if they were fact, with no other purpose than to make Windows 8 sound bad.

            Why are they in such a panic mode?

            Easy.

            Because like it or not, Windows 8 is indeed selling and will continue to sell. Its not going to stop no matter how high you pile the FUD.
            Cayble
        • Naaaa...too many others say different.

          Not saying you for some reason may have some odd difficulty, but far too many have posted even right here on ZDNet saying they love Windows 8 on their desktop.

          Its fair that you might say you in particular cannot seem to get used to it, but far far too many others have said its not a problem to make claims that Windows 8 dosnt make for a good standard use OS.
          Cayble
      • don't agree

        I returned a touchscreen laptop running Win 8 because, it turns out, laptop touch screens suck. I did find out in very short order why the Surface is designed the way it is. You need a back support for taps to work right. Without one you either don't get taps or you get double taps. Swipes seem to be okay. I went to the local stores over the holiday and tried a bunch of other touch screen laptops and they all have the same problem, no rigidity.

        I find the multi-touch pad works better than a touch screen with no back support. The Surface and the Yoga were the only two that worked well in this respect.
        mswift@...
    • It's the hardware, not the software...

      As the_tyrant pointed out, Fujitsu is trying to sell out-dated hardware (and by "out-dated hardware," I mean non-touch laptops) and THAT'S their real problem--not Windows 8.

      For those companies that went to the trouble of designing (and releasing) hybrids optimized for Windows 8, they're seeing a sales pop for Windows 8 (or that's what some of them are saying at least).

      We also have to keep in mind that we're still in an economic slump (personally, I don't think the Great Recession ever really ended for most people) and that's definitely hurting big ticket purchases like a new PC.

      As Mr. Bott pointed out, even in a worst-case scenario, Windows 8 is likely to be installed on at least 200 million devices a year from now... which makes it competitive with iOS and Android (I'm comparing it to those since Windows 8 is a mobile OS... as well as a desktop OS). As a result, I doubt developers will ignore it. The market will just be too large, and Microsoft is just too (historically) attractive to developers.

      I just think there's a lot of fear, uncertainty, and doubt (FUD) swirling around Windows 8 because Microsoft's competition realizes that Microsoft has a jump on them by putting a fully-functional desktop OS onto a tablet form factor. Microsoft has raised the bar, and a year from now, consumers will expect ALL devices to be touchscreen... which means Apple better get working on a touchscreen Macbook... or they'll be left behind.
      newyorkcitymale
      • I used a

        touchscreen laptop with Windows 7 for years. I don't need Windows 8 for touch.
        roteague
        • OK...

          I'm not sure why you're making that point, exactly. If you liked Windows 7 on a laptop, then it seems very likely that you'd like W8 even more... though I didn't even make that suggestion in my comment.
          newyorkcitymale
          • ?

            Actually if you love windows 7 you will hate windows 8 since windows 8 is the most non windows windos ever and operates nothing like the well made windows 7.
            Fletchguy