Blame the dollar: PC prices rise, as features fall
Gartner predicts that currency devaluation will compel major computer manufacturers to reverse a longstanding trend. "PC vendors selling to Europe and Japan, where local currencies have fallen up to 20 percent since the start of 2015, have little choice than to raise prices to preserve profits" -- by as much as 10 percent, Ranjit Atwal, Gartner Research director, says in a statement earlier today.
Higher prices mean more consumers will do with leaner configurations, and many businesses will push back upgrades. All the while, PC makers will give customers less for more money. Atwal anticipates fewer features in new computers in affected markets and increased sales emphasis in "regions least affected by these currency effects".
The analyst firm forecasts that price increases will, through 2016, drive demand for sub-$500 PCs, which will make up 30 percent of personal computer sales. The $500-$800 segment -- the largest, making up 40 percent of consumer buyers -- will see buying delays. Meanwhile, Gartner expects $800-plus PC buyers to delay purchases, extending continued usage by about 10 percent. Business are expected to adopt similar tactic.
Apple and Microsoft
If the forecast proves accurate, Apple's position is riskiest. The majority of its computers sell for prices higher than $800, raising questions about the practical response. Will Apple preserve prices for the long term or make concessions like other PC manufacturers are expected to? Already, during fiscal second quarter 2015, overall revenue from Japan fell 37 percent sequentially and 15 year annually. European dollar sales fell 29 percent and grew 12 percent during the same time period.
During this week's earnings conference call, Apple CFO Luca Maestri described the currency climate as "headwinds". warning broadly -- meaning for more than just computers -- that "when we look into the June quarter, we expect to see another 40 basis points of negative impact from currency".
The timing of Gartner's forecast is interesting, with Microsoft showcasing Continuum during today's Build developer conference. The software giant will provide Windows Phone users with the means of effectively turning their mobiles into full-blown PCs when attached to peripherals, like keyboard, monitor, and mouse. With Windows 10, Microsoft makes way for penny-pinchers to get the best of both a personal computer and smartphone.
The company couldn't ask for better validation of the provocative product strategy. The appeal is something Apple and Google can't match: Real desktop operating system from the cell phone; Android and iOS are not. Granted, PC hardware tends to be more hearty, but differences matter less when manufacturers cut components to preserve margins.
Something else important about Continuum: The concept. Apple lets users have a continuous experience across devices, but the underlying idea is that customers will buy more things. Microsoft takes a more modern approach of focusing on context. As I explained 18 months ago, there is no post-PC era. It's an Apple myth. We live in the contextual cloud computing epoch, which Microsoft increasingly adopts as a core development ethic.
Continuum also plays to a longstanding Microsoft corporate ethic: Provide customers more value from what they have. Again, benefiting from currency devaluation-hardship timing, that $500 spent on a high-end Windows Phone could be device enough for some consumers -- and even some businesses.