Waiting for PC sales to recover? Don't hold your breath

The PC industry has suffered its worst decline in shipments since IDC started collecting data back in 1994, nose-diving 14 percent during the first three months of 2013 compared to the same quarter a year ago. IDC had attempted to prepare us for bad news by issuing a warning earlier this year that sales were likely to fall by about 7.7 percent, but the actual decline makes those initial pessimistic predictions seem utterly desirable compared to the truth.

IDC doesn’t pull any punches when it comes to dishing out the blame for the decline, pointing fingers at Microsoft and the hardware OEMs, the very company at the heart of the PC industry.

"PC industry efforts to offer touch capabilities and ultraslim systems have been hampered by traditional barriers of price and component supply, as well as a weak reception for Windows 8," the report claims. "The PC industry is struggling to identify innovations that differentiate PCs from other products and inspire consumers to buy, and instead is meeting significant resistance to changes perceived as cumbersome or costly."

Ouch. Not only is the industry in trouble, but it doesn't have a clue what to do in response to the mess it has found itself in.

And, as if we didn't know already, IDC tells us where the money is going instead. "Fading Mini Notebook shipments have taken a big chunk out of the low-end market while tablets and smartphones continue to divert consumer spending."

For the PC industry to have its worst quarter following the releaser of a new version of Windows is bad news for Microsoft.

"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 Bob O'Donnell, IDC Program Vice President, Clients and Displays.

Analysts have taken a look at the data and concluded that this decline is going to have a negative effect on companies that are closely tied to the PC industry, especially Intel, AMD, and HP.

Are you holding your breath, waiting for things to get better? Don't. It's probably never going to happen.

I'm basing these most negative predictions on a number of factors.

• The PC industry spent too long first ridiculing, then in denial over the effect that the iPad was having on the industry, and they failed to respond in a timely fashion, allowing the iPad — along with a handful of Android-powered hardware — to first get a foothold, and then gain traction.
• Windows is no longer the driver of sales that it once was. Windows used to be seen as a core component of a PC, and people would upgrade in order to stay ahead of the curve, but over the past few years it has been seen as little more than a platform for other applications. Twitter, Facebook, Word, Excel, Photoshop, and almost every other app looks and runs the same whether you're using XP or Windows 8.
• Free and low-cost operating system updates — such as OS X, iOS, and Android — have devalued the operating system. Consumers don't feel that Windows offers value for money.
• PCs last longer than they used to, which extends the upgrade cycle.
• Another factor that has extended the upgrade cycle is Moore's law. Over the past few years, PCs have grown so fast and powerful that consumers and businesses no longer feel the pressure to buy new systems every two to three years.
• Tablets and smartphones are going to get faster and more powerful, and will become capable of taking on tasks that currently require a PC.
• A contraction in PC shipments will undoubtedly result in casualties, which in turn will mean less competition and less innovation.  
• PC prices continue to be too high, especially compared to tablets and smartphones. One of the factors keeping PC prices up is the cost of Windows, and Microsoft doesn't seem to be willing to cut prices.

This isn't to say that PCs are going to vanish overnight — they're not. People are going to need PCs for the foreseeable future, but the difference is that they're not going to pay top dollar for them, and it won't be desktops and notebooks that drive the industry from here on in. That baton has been passed irrevocably to the post-PC devices.

I would expect PC shipments to stabilize over the next couple of years, and for there to be a small recovery as people replace their Windows 7 PCs — possibly when the next version of Windows is released. Beyond that, barring some huge push by the big PC players, I don't see PC shipments making any long-term significant recovery.