What the PC sales slump really means — and why it will get worse

There’s lot of both hand-wringing and hope going on today in the world of PCs. PC sales are down, despite all those sexy Ultrabooks that were supposed to reverse the trend and let PCs enjoy the same growth as Macs have had despite the economic woes. That’s the hand-wringing. The hope is that Windows 8 will solve the problem of people not buying PCs like they used to. For example, Sanjay Bathia, CEO of Windows app dev provider Izenda, says “there seems to be a rejuvenated hope for Microsoft” due to Windows 8, which he suggests could lead to an “Apple takedown.”

I’m not convinced Windows 8 will deliver the surge in sales, given how awkward it is to use.

Ultrabooks haven’t reversed PC sales’ slide

It’s clear that PC sales are down. What’s less clear is whether this is just a Windows phenomenon or an industrywide phenomenon. The two leading purveyors of estimated computer sales data had very different guesstimates about PC sales in the second quarter. Gartner says worldwide PC sales were down 0.1 percent from Q2 2011 to Q2 2012, but Mac sales in the United States were up by 4.3 percent. IDC agrees that worldwide PC sales were down 0.1 percent, but it also says that Mac sales in the U.S. were down 1.1 percent. Lenovo and Asus are big winners and Dell and Hewlett-Packard hit the skids; the numbers vary depending on who you believe.

We won’t get definitive word about Apple sales until the company’s financial results conference call on July 24. But there’s a whole lot of “analyzing” going on right now that just doesn’t make sense.

Let’s start with the obvious: Ultrabooks went nowhere. Mikako Kitagawa, a principal analyst at Gartner, said, “Despite the high expectations for the thin and light notebook segment, Ultrabooks’ shipment volume was small and had little impact on overall shipment growth.” That shouldn’t surprise anybody: Ultrabooks are and always have been a lot of hot air. We won’t have definitive numbers until July 24, but it wouldn’t surprise me a bit if, in Q2 2012, the MacBook Air outsold all branded Ultrabooks (remember, that’s an Intel trademark) by 10 to 1.

Some analysts believe that Ultrabooks are poised for greatness this summer, now that the Intel “Ivy Bridge” chips are out. I believe that’s hogwash. Why? “Ivy Bridge” is dandy, but it isn’t going to drive tens of millions of people to buy new computers.

Why the PC sales drop: Waiting for Windows 8 or buying iPads instead?
Consumers (and corporate buyers) are smarter than the analysts seem to think. Why on earth would someone buy an x64 Ultrabook right now, knowing that touch-friendly, Windows 8-oriented models are just around the bend? With Windows 8 due in October, it doesn’t make any sense to lock yourself into a touch-disabled computer, unless you’re absolutely certain that you’ll never want to run Windows 8. And if you envision a fingerless future that’s Win 7-only, why not wait for the inevitable Ultrafire sale in September?

That customer reaction to wait for Windows 8 in fact is IDC’s explanation for the drop in PC sales, though it attributes the pause to buyers being confused rather than intentional in their decision to wait: “The announcement of a Windows 8 launch date, as well as broader communication of new features in the OS, are key steps that would help to address uncertainty about new product availability and help consumers and channels plan their purchases.” Umm, no — customers are not confused. They know what’s going on and are simply being rational in waiting to see if the promise is matched by the delivery. After all, Windows 8’s launch date has been pegged around October for many months now. As far as a description of new features, Microsoft’s Building Windows 8 blog holds about 10,000 pages covering every imaginable detail.

Gartner says that something else explains the sales decline: “Consumers are less interested in spending on PCs as there are other technology product and services, such as the latest smartphones and media tablets, that they are purchasing.” Given the raging success of the iPad and both iOS and Android smartphones, that’s an easy explanation.

Gartner also says the gravitating to tablets and other newfangled devices is more pronounced in developed countries. That makes sense — almost everyone in such countries already has a PC, so nearly all sales are replacement sales. And why replace a PC that works OK, especially when there’s something cooler to spend your money on?

But both Gartner and IDC point out a troubling fact: That gravitating is also happening in less-developed countries, where PCs are less established. That suggests many Asians, Africans, and others may skip the PC entirely. That has dire consequences for PC makers, with or without Windows 8. And although Mac sales are doing relatively well in the United States, Mac sales in most other countries are minor; the American infatuation with MacBook Airs may not translate overseas, even as the iPad does well. Apple is doing its best to attract buyers overseas, as the strong focus on Chinese native services in OS X Mountain Lion shows. We’ll see if Apple’s Macs can buck the general post-PC trend.

Windows 8 is not likely to jump-start PC sales
It’s possible that Windows 8-based tablets will become as popular as the iPad; Microsoft’s Surface tablet certainly looks compelling, in both Windows RT (ARM) and Windows 8 Pro (Intel) guises. If you don’t use the Windows 7 desktop portion, or use it very little, Windows 8 on a tablet is compelling. A good selection of tablet-optimized software could give Windows 8 tablets — and particularly Windows RT tablets — a big boost.

But not Windows 8 desktop PCs, laptops, or hybrid devices. In my experience, even with touch-friendly hardware, the old-fashioned desktop in Windows 8 is very difficult to use — legacy apps, even Windows apps, weren’t designed for touch, and the result is painful. I suspect most users will avoid Intel-based Windows tablets as a result. As far as Windows 8 desktop PCs, it’s not clear why anyone would want one. The Windows 7 part is, well, Windows 7, albeit with a few new bells and whistles. No matter how you look at it, the Metro side of Windows 8 is awkward on a desktop computer, even if you have a touchscreen.

I simply don’t know too many people who are currently waiting with bated breath so they can buy a new PC with Windows 8 on it. I did know people who were genuinely excited about buying new computers with Windows XP and Windows 7 (primarily to ditch Vista), and of course to buy the popular but pricey Retina MacBook. But Windows 8? No way.

Windows 8 may well be the new Vista or Windows Phone 7 — an albatross of a product, destined to serve primarily as an embarrassing stepping stone to new products. Perhaps Windows 9 or 10 will do better, but for now what we’ve got is Windows 8, and it doesn’t bode well.

I may be wrong, but I believe Q3 2012 and beyond are going to be one very tough ride for PC manufacturers.