Don't blame Windows 8 for weak PC shipments

Well, well, perhaps Windows 8 isn't cause for all the PC market's woes, as IDC strongly stated yesterday. Gartner's first-quarter assessment is grim but no reaper. The analyst firm lays blame partly on consumers unwillingness to pay more for touchscreen models and asserts that the business market actually grows. Also, the firms released contradictory data, with Apple showing glaring and shocking differences.

Mikako Kitagawa, Gartner principal analyst, doesn't blame Windows 8: "Consumers are migrating content consumption from PCs to other connected devices, such as tablets and smartphones". The first factor pulling down PC shipments, which by Gartner estimates fell 11.2 percent globally during Q1, is tablet competition, then. Not Windows 8.

Cause and Effect

"Touchscreen-based Ultramobiles offer PC manufacturers an opportunity to recover market share from media tablets, but Windows 8 PCs with touchscreens accounted for only a small percentage of consumer PC shipments in the first quarter of 2013", Isabelle Durand, Gartner principal research analyst, says. Microsoft Surface Pro is in this category.

The problem: "The majority of consumers remain unwilling to pay the price premium for touchscreen capabilities on PCs at this stage", Durand says. "But, even so, touchscreens and Windows 8 will represent key opportunities for PC manufacturers in the second half of 2013".

Gartner's read is remarkably different from IDC's. "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", Bob O'Donnell, IDC vice president, asserts.

"While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, 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", he asserts.

IDC blames Windows 8, singling out Modern UI, while Gartner focuses on price competition. As someone who really likes the new operating system -- and never expected to -- and who worked as an analyst, Gartner's assessment is more credible. That's something Microsoft's leadership should consider while developing Windows 8.1 and its successors. Windows 8 isn't a bad operating system, but backpedaling could make it one.

Demand for traditional PCs is weak, which makes sense given it's a mature product category. Touchscreen models, whether true tablet or hybrids, offer something different, but not necessarily more enough. They compete with media tablets like Apple's iPad that offer similar top-line functionality for hundreds of dollars less. For many consumers, iPad, or even smaller tablets, is good enough. So on a touchscreen-to-touchscreen comparison, media slates win, and that phenomenon has little to do with Windows 8 or changes Microsoft made to the user interface.

Preliminary Worldwide PC Vendor Unit Shipment Estimates for 1Q13 (Units)

Note: Data includes desk-based PCs and mobile PCs, including mini-notebooks but not media tablets such as the iPad.
Source: Gartner (April 2013)

Emerging Woes

But the PC isn't a mature product category everywhere. "Even emerging markets, where PC penetration is low, are not expected to be a strong growth area for PC vendors", Kitagawa says. The trend among emerging markets is most disturbing for computer manufacturers and Microsoft, which had banked on continued growth there to offset sluggish refresh cycles elsewhere.

"Consumers' content consumption was, and still is, moving from PCs to other types of connected devices", Durand says. "Even in Central and Eastern Europe and the Middle East and Africa, where PC penetration is low, growth in PC shipments was down as first-time device buyers chose other devices".

Price sensitivity is even greater in most emerging markets, where a low-cost touchscreen media tablet or smartphone has more obvious utility than costlier -- and more-stationary -- PCs. Surface RT competes in that category, but is a costly alternative to smaller slates, like Google Nexus 7.

Preliminary U.S. PC Vendor Unit Shipment Estimates for 1Q13 (Units)

Note: Data includes desk-based PCs and mobile PCs, including mini-notebooks but not media tablets such as the iPad.
Source: Gartner (April 2013)

The measure is always this: What's good enough for the lowest price -- among most buyers. There is always a smaller percentage of people willing to pay more, as they do for Macs. Tablets' big benefit is touch; apps the other.

While the broader PC market is in crisis, there is a bright spot that is hugely important to Microsoft and Windows. "Unlike the consumer PC segment, the professional PC market, which accounts for about half of overall PC shipments, has seen growth, driven by continuing PC refreshes", Kitagawa says. "Despite the fact that some regions already passed the peak of PC refresh, overall professional PC demand continued to grow". Businesses are Microsoft's core market.

This difference in emphasis -- tablets and price as decline's cause and business PC demand -- isn't all that separates Gartner and IDC assessments of Q1 shipments. IDC says they declined the most ever, since the firm starting tabulating numbers in 1994. EMEA -- Europe, Middle East and Africa -- is the worst by Gartner's reckoning, rather than the whole world. The firm sees an 11.2 percent year-over-year decline, while IDC claims 13.9 percent. U.S. market contradiction is 9.6 percent according to Gartner, while IDC sees a 12.7 percent decline.

But nowhere do the differences stand out more than for Apple. IDC reports U.S. shipments falling 7.5 percent year over year, while Gartner sees them increasing by 7.4 percent. As such, market share estimates don't jive either -- 11.6 percent (Gartner) and 10 percent (IDC). Fifteen points separate growth estimates, which is huge and raises legitimate concerns that one of these analyst firms makes grave mistakes counting and interpreting the data's meaning. Whom do you believe?

Photo Credit: Joe Wilcox