Unless you’ve been living under a rock for the last five years, you’re well aware that the consumers have largely shifted away from buying PCs and allocated their dollars toward mobile computing devices — aka smartphones and tablets. Considering that 65% of all PCs end up in the hands of consumers, this trend was not welcomed by Microsoft Corporation (NASDAQ:MSFT) investors. As a result, worldwide PC shipments have remained under pressure and demand has for the most part has stagnated.
The dawn of the post-PC era completely blindsided Microsoft Corporation (NASDAQ:MSFT), resulting in Team Redmond playing the always-fun game of catch-up. To date, Microsoft Corporation (NASDAQ:MSFT)’s efforts have been largely met with a lack of consumer enthusiasm. Moreover, it remains uncertain if Microsoft Corporation (NASDAQ:MSFT) will ever play a leading role in the mobile computing revolution. Regardless of how the mobile computing saga plays out for the beleaguered tech giant, the company has (for the time being) an existing PC business that’s more than keeping its head above water. Will Microsoft Corporation (NASDAQ:MSFT) always have the luxury of having an enormous PC business to fall back on?
In the context of PC shipments, less worse could be taken as a sign that the industry is closer to reaching a near-term bottom. However, when less worse is the result of a lowered forecast, which originally called for growth, it’s a sign that the PC industry has yet to find its footing. IDC recently lowered its forecast and it now expects PC shipments will decline by 1.3% in 2013, down from an original forecast of 2.8% growth. IDC believes Windows 8 underwhelmed consumers and touch-enabled PCs continue to remain in limited supply. Going forward, IDC expects growth to be “limited” in both 2014 and 2015, and the contraction will continue thereafter. In other words, the PC landscape is expected to remain pretty bleak for the foreseeable future.
The smell of desperation
In an effort to remain competitive against tablets, Microsoft Corporation (NASDAQ:MSFT) has reportedly offered license discounts to OEMs that build Windows 8 machines with a form factor less than 11.6 inches. This development plays into the harsh reality that Windows 8 sales are off to a worse start than Vista. It’s not that Windows 8 is an inherently bad operating system, it’s that for users to take full advantage of the touch-enabled OS, they need compatible hardware. Contrary to Microsoft Corporation (NASDAQ:MSFT)’s belief, Windows 8 has failed to entice users to upgrade their PCs ahead of schedule for the ability to use a touch screen.