Grim PC business shows no sign of recovery

IDC and Gartner pin hopes on enterprise refresh to Windows 10 as consumer market collapse continues

market crash loss down bankrupt

PC shipments plummeted in the first quarter, dropping 11.5% compared to the year before, researcher IDC said Monday.

The impressively dismal decline was a poor opening for a year that IDC once believed would see the bottom of the PC industry's years-old trough. But just a month ago, IDC revised its forecast, saying that shipments in 2016 would fall by 5.4% from 2015.

Rival market research vendor Gartner, which also issued its Q1 shipment numbers this week, pegged the drop-off at 9.6%, with the difference largely attributed to how each company tallies shipments. Gartner, unlike IDC, counts tablets with detachable keyboards, like Microsoft's Surface Pro, as personal computers, and so usually comes up with larger shipment figures.

The weak quarter may not have been a surprise -- IDC, for instance, had set its worst-case scenario at -11.2% -- but it was stunning nonetheless. The year-over-year decline was the largest since the first quarter of 2013, IDC analyst Jay Chou said in an interview.

Personal computer makers shipped approximately 60.6 million systems, according to IDC, 64.8 million by Gartner's projection. A year earlier, the two had tapped shipments at 68.5 million and 71.7 million, respectively.

Even worse, the end of the decline is not in sight.

"We do expect this year will hopefully be nearing the bottom [emphasis added]," said Chou, who went on to say that IDC is currently forecasting a decline of 1.1% for 2017. "Only in 2018 do we see a flattening of the market." Then, however, and through 2020, the fall-off will continue at an annual rate of 0.5%.

The biggest culprit in the downfall of the PC market has been the consumer portion. In 2015, shipments of consumer PCs dropped by nearly 13%, compared to an overall decline of 10%.

Where's the bottom of the consumer PC business? Chou wasn't sure.

"We're not expecting consumer PCs to either grow or flatten out, but continue shrinking through 2020," Chou said.

Microsoft's offer of a free upgrade to Windows 10 -- made to all consumers and many small and mid-sized businesses -- didn't help. While Microsoft extended the deal to get as many users as possible onto the new OS as quickly as possible, it didn't do the computer-making-and-selling-business any favors.

But Chou looked on the bright side. "It seems like a good number [of customers] took them up on the offer," he said, referring to Microsoft's latest claim that Windows 10 had 270 million active users. "That's good to see, and to take away the negativity of the Windows 8 family. And it may spread the seed for an eventual upgrade of PCs."

Both IDC and Gartner pinned their predictions of a slowing rate of decline on purchases of computers by companies as they began to roll out Windows 10 later this year. "As we head toward the end of 2016, things should start picking up in terms of Windows 10 pilots turning into actual PC purchases," Chou said.

If that doesn't occur, well, the numbers will get even worse. Many analysts believe that large migrations to Windows 10 won't start until next year.

Under the best of circumstances, the PC business will remain in the 250 million to 260 million range through 2020, the furthest out IDC forecasted, said Chou. That's a far cry from 2011's "Peak PC," when OEMs (original equipment manufacturers) shipped about 375 million machines.

This year's first quarter was the 17th straight contraction, a stretch three times longer than the only previous sustained decline, which was for a five-quarter span in 2001-2002.

"It is certainly pretty awful," Chou said of the business's spiral.

No kidding.

Copyright © 2016 IDG Communications, Inc.

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