PCs Q3 14A – Big is beautiful

Only bad marketing keeps the PC market from growth.

• Both Gartner and IDC have released their Q314A figures for the PC market which continues to show very little movement.
• Q314A Shipments have been essentially flat, falling by just 0.5% YoY to 79.4m units.
• IDC reported 78.5m units shipped representing a decline of 1.7% YoY.
• The geographic story has remained the same with Europe and North America remaining reasonably healthy while Asia saw declines.
• The enterprise has continued to support the market in Q3 14A as companies are still migrating away from Windows XP to Windows 7.
• Windows 8 remains of virtually no interest to anyone.
• Consumers have no real idea why they should buy it and companies prefer the excellent Windows 7.
• Microsoft is hoping to change that with Windows 10 which looks to be aimed at keeping the enterprise refresh cycle going (see here).
• The latest figures also show that the biggest companies are all gaining share at the expense of the smaller ones who are increasingly exiting the market.
• Lenovo, HP, Dell, Acer, Asustek and Apple have all gained share and remain the top six vendors globally.
• This comes as no surprise as PCs are commodities that ship at wafer thin margins meaning that huge scale is required to eke out a living.
• Windows 10 is probably enough to keep the PC market from entering another decline but it is very unlikely to return it to growth.
• This is because Windows 10 is what Windows 8 should have been and as a result does not really offer anything that is very new and likely to make users rush out and buy new PCs.
• What I think is far more likely to return the PC market to growth is the new use case that I see emerging for mobile computing.
• The technology is finally in place for a user to have the power of a desktop in a device that is no bigger than a tablet.
• This device with a Bluetooth keyboard and a mouse enables the user to have a desktop PC experience wherever he goes. (see here)
• This represents a huge leap forward in the usability of computers while not physically at the office and is what I think will trigger a replacement cycle for laptops.
• This will allow the PC market to return to growth for a couple of years and the rising tide is likely to float all boats.
• A big hindrance to this remains price but I think that this use case is so compelling that users will be willing to pay up for it.
• It also helps that a tablet is no longer required and so the budget for this device can be bigger, combining what would have been spent on a new laptop and a tablet.
• The biggest problem is the fact the PC makers and Microsoft’s marketing department have been selling the laptop form factor for 30 years and have yet to realise that it is obsolete (see here).
• This is a big problem and until they realise where the potential lies, the users are also unlikely to get it.
• This is why it is impossible to say when this cycle will kick-off, but the valuations of both Intel and Microsoft are undemanding enough for it to be worth the wait.