Holiday PC sales slide for
first time in 5 years
By Bill Rigby 1/11/2013
Holiday-season sales of
personal computers fell for the first time in more than five years, according
to tech industry tracker IDC, as Microsoft's new Windows 8 operating system
failed to excite buyers and many instead opted for tablet devices and
smartphones.
The slump caps a miserable
year for PC makers such as Hewlett-Packard Co, Lenovo Group and Dell Inc, which
saw the first annual decline for more than a decade with no immediate signs of
relief.
It underscores an
unspectacular launch for the latest version of the Windows franchise, which
Microsoft is banking on to fight off incursions into the PC arena by
touch-friendly devices such as Apple Inc's iPad.
"The sense is that
until Windows 8 is fully installed and prices start to come down, we will be in
this state of negative dynamics in the PC market," said Aaron Rakers, an
analyst at Stifel, Nicolaus & Co.
Still, analysts warn
against counting out Windows 8 — the most radical change in the operating
system in 20 years — as consumers grow more comfortable with its tile-based
interface and touch features.
In the past, a new
operating system from Microsoft tended to stimulate a spurt of PC sales, but PC
makers simply did not get enough attractive machines into the market, said IDC.
"Lost in the shuffle
to promote a touch-centric PC, vendors have not forcefully stressed other
features that promote a more secure, reliable and efficient user
experience," said Jay Chou, senior research analyst at IDC.
This year could be better,
he suggested, even in the face of talk about the death of the PC as tablets are
on track to outsell full-featured machines for the first time in the United
States.
"As Windows 8
matures, and other corresponding variables such as ultrabook pricing continue
to drop, hopefully the PC market can see a reset in both messaging and demand
in 2013," said Chou.
PC makers sold 89.8
million units worldwide in the fourth quarter of last year, down 6.4 percent
from the same quarter of 2011. That was slightly worse than expected by most,
and the worst performance for more than five years, when the global economy
shuddered to a halt and ushered in the worst recession since World War II.
For all of 2012, 352
million PCs were sold, down 3.2 percent from 2011. That was the first annual
decline since 2001, according to IDC, in the wake of the tech stock crash and
the September 11 attacks.
IDC is forecasting a
meager 2.8 percent growth in PC sales for 2013.
"There's a lack of
compelling reasons to upgrade," said Ashok Kumar, an analyst At Maxim
Group, who said people are now waiting up to 10 years to replace computers
rather than five in the past.
"Increases in
performance have been smaller and there are fewer new applications that require
more computing horsepower," he said. "In developing markets, the
first purchase is not a PC, it's a smartphone, especially in markets where
literacy levels are low."
No miracles at CES
The numbers are bad news
for Microsoft, which still provides the underlying software for nine out of 10
PCs but is suffering as Apple's iPad and other tablets eat away at the cheap
end of the PC market.
Touch-friendly Windows 8
and Microsoft's own Surface tablet were designed to counter that shift, but the
radical new-look software has not gripped consumers' imaginations.
"Windows 8 wasn't
going to be as big a catalyst," said Shaw Wu, analyst at Sterne Agee.
"It's so different, it's almost uncomfortably different from past Windows,
and there's a risk that Windows 8 ends up like Vista."
Windows Vista, released
worldwide in 2007, was Microsoft's least popular operating system with users in
recent years.
Microsoft pulled out of
the Consumer Electronics Show in Las Vegas this year, vacating its usual
sprawling display area, but PC makers such as Asustek, LG Electronics and Samsung
Electronics filled the gap with a dizzying array of big screen computers,
lightweight laptops, tablets and combinations of those, all running Windows 8.
Many of the new models
attracted jostling crowds on the show floor, like Panasonic Corp's 20-inch
ultra-high-definition tablet and Razer's dedicated Edge tablet for PC gamers.
But none was hailed a
show-stopper that might single-handedly turn around the fortunes of Windows.
"No single device
will spur sales, it will take time for consumers to learn that Windows 8 even
exists. CES will do little to change that," said Sarah Rotman Epps, an
analyst for tech research firm Forrester. "Windows 8 is going to be a slow
ramp, regardless of hardware quality."
Microsoft says it feels
good about the progress of Windows 8, as sales hit 60 million this week after
10 weeks on the market. That is in line with Windows 7 three years ago, and
well ahead of Vista, which took 100 days to reach 40 million sales.
Tami Reller, chief
financial officer of Microsoft's Windows unit, said sales of Windows 8 PCs may
have been held back by shortages of the most popular touch-screen machines.
"The level of demand
I think surprised a lot of people. And frankly, the supply was too short,"
said Reller at an analyst presentation at CES this week.
Hopes for Surface with
Windows 8 Pro
Microsoft is looking to
juice that demand further this month with its new Surface with Windows 8 Pro, a
tablet running an Intel processor that is fully compatible with Office and
traditional PC programs, unlike the first Surface it launched last year based
on an ARM Holdings-designed chip.
Despite that bullishness,
analysts have been edging down their earnings expectations for Microsoft
lately.
"Win 8 is
disappointing, the PC market will remain weak for awhile and margins are likely
capped," said Morgan Stanley analyst Adam Holt on Thursday, as he
downgraded the stock to 'equal-weight' from 'overweight'.
Investors are also
nonplussed, driving Microsoft's shares down neraly 20 percent since last March,
even as the Standard & Poor's 500 has marched upward to a five-year high
this week. The shares are down 6 percent since the launch of Windows 8 on
October 26.
(Additional reporting by
Poornima Gupta, Miyoung Kim, Timothy Kelly, Sinead Carew and Noel Randewich in
Las Vegas, and Alistair Barr and Alexei Oreskovic in San Francisco.; Editing by
Gary Hill and Steve Orlofsky)
(c) Copyright Thomson
Reuters 2013. Check for restrictions at: http://about.reuters.com/fulllegal.asp
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