Microsoft’s decision to end support for the Windows XP operating system last year helped significantly slow the years-long decline in PC sales worldwide, giving a much-needed financial boost to system and component makers in 2014.
Shipments of PCs last year did fall—by 2.1 percent—over 2013, but the drop was not as precipitous as in previous years, and the strong sales of commercial systems as businesses migrated off Windows XP was welcome news to the industry, as evidenced by Intel’s record revenues.
However, the magic from the Windows XP upgrades has tailed off, and PC shipments this year are again spiraling downward. Analysts from Gartner and IDC this week indicated second-quarter shipments fell 9.5 percent and 11.8 percent, respectively, when compared with the same period in 2014. Some tech vendors, like chip makers Intel and Advanced Micro Devices, were forced to reduce revenue forecasts due to slowing PC demand.
And they warned that—unlike last year’s situation with Windows XP—Microsoft’s release later this month of Windows 10 will probably do more to hurt than help the industry, at least in the short term. The myriad issues include Microsoft’s offering a free upgrade to Windows 7 and 8.1 users for the first three months after Windows 10 is released, with the expectation that many users will simply update the operating system on their systems rather than buying new ones integrated with Windows 10. That will essentially extend the life of current PCs by at least three months.
At the same time, there is anticipation of upcoming new processors from Intel (Skylake) and AMD (Carrizo) that will convince some users to wait until systems with those chips hit the market this year. In addition, PC vendors and their channel partners, in anticipation of Windows 10, have reduced their inventory, the stronger dollar is driving PC prices up overseas and the market continues to be challenged by other devices, such as smartphones and—to a lessening degree—tablets.
“We’re expecting the Windows 10 launch to go relatively well, though many users will opt for a free OS upgrade rather than buying a new PC,” Loren Loverde, vice president of IDC’s Worldwide PC Trackers and Forecasting unit, said in a statement. “Competition from 2-in-1 devices and phones remains an issue, but the economic environment has had a larger impact lately, and that should stabilize or improve going forward.”
Gartner analysts, who expect total PC shipments for the year to hit about 300 million, a 4.5 percent decline over 2014, are seeing the same trends, though like their IDC counterparts believe Windows 10 will help boost shipments next year.
“We do not expect the global PC market to recover until 2016,” Ranjit Atwal, research director at Gartner, said in a statement. “The release of Windows 10 on July 29 will contribute to a slowing professional demand for mobile PCs and premium ultramobiles in 2015, as lifetimes extend by three months. However, as suppliers and buyers adjust to new prices, Windows 10 could boost replacements during 2016.”
Windows 10 No Immediate Savior for PC Industry
A key part of the equation is the commercial PC space, according to Bob O’Donnell, principal analyst at TECHnalysis Research.
“The challenge we’re facing is that commercial PCs make up 50 percent of the total market,” O’Donnell told eWEEK. “Commercial is not going to immediately jump onto Windows 10. It’s going to take a while.”
He pointed to his own research into the U.S. health care industry, where he found that 15 percent of businesses plan to deploy Windows 10 in the next year, while 25 percent will wait 12 to 24 months. Another 17 percent won’t move to Windows 10 for at least two years, and 34 percent have no plan in place.
The health care industry—due in part to the heavy regulatory environment—tends to be more conservative in their IT purchases than some other segments, such as financial services, O’Donnell said. Still, it’s a reflection on how long-term the commercial adoption of the operating system will be.
He also agreed that the PC industry’s challenges are fed more by economics than competition from smartphones and tablets. For example, the recent problems in the Chinese economy could slow PC purchases in that country. While there are a lot of PCs in China, the rate of PC ownership is much lower than in the United States, O’Donnell noted.
Gartner’s Atwal said that his forecast calls for shipment of all devices—not only PCs, but also ultramobile systems, tablets and smartphones—falling 1.3 percent this year.
“This was partly due to a continued slowdown in PC purchases in Western Europe, Russia and Japan, in particular, largely due to price increases resulting from local currency devaluation against the dollar,” he said.
Despite this, Windows 10 should prove an ultimate benefit, given the spate of improvements to the operating system and the relative lukewarm reception to Windows 8.1 since its release, according to O’Donnell.
“There are a lot of cool capabilities in Windows 10,” he said, noting such features as Windows Hello face-recognition technology, and the return of the Start button. “Longer term, it is an important step forward. There are a lot of things there that work and make sense.”