Friday, March 15, 2013

How PC Manufacturers Misread the Market in 2012

The good news for people who needed to replace an old Windows-based PC was that if you search online you can still find refurbished new PCs that had Windows 7 installed. Otherwise, ongoing demand for PCs with the leading operating system was weak.

Despite the intense industry efforts to overcome market inertia, 2012 nonetheless ended badly -- with global PC shipment volume shrinking 3.7 percent, according to the latest market study by International Data Corporation (IDC).

With dramatically lower than forecast adoption of Windows 8 during the 2012 holiday season, and continued pressure from low-cost media tablets, IDC now expects PC shipments to decline further by 1.3 percent in 2013.

Disappointing holiday sales to consumers, an underwhelming reception to the Windows 8 launch and reduced IT budgets characterized the market during the second half of 2012 -- leading to a year-on-year decline of 8.3 percent in fourth quarter shipments.

Furthermore, emerging market growth potential for PCs was also bleak. 2012 marked the first year that emerging market shipment volume declined. 2013 growth is projected at less than 1 percent, with continued modest single-digit growth through 2017.


For mature markets, 2013 will mark the third consecutive year of volume declines for PCs. IDC continues to expect limited growth in 2014 and 2015 with contracting shipment volume in later years.

What was the likely cause of this unfortunate scenario? The leading PC manufacturers apparently misread the market, ignored the early warning signs and proceeded with their ill conceived product or market development strategies. There's very little mystery here, based upon the results.

IDC says that the PC industry bet heavily on Windows 8 and less expensive Ultrabook offering that failed to revive demand -- clearly, in hindsight, those marketing efforts were misguided.

Moreover, a lack of touchscreen components has contributed to a limited supply of touch-enabled Windows 8 models -- which were relatively expensive, when compared to other options.

"The PC market is still looking for updated models to gain traction and demonstrate sufficient appeal to drive growth in a very competitive market," said Loren Loverde, vice president at IDC.

IDC says that growth in emerging regions has slowed considerably, and they continue to see constrained PC demand as buyers favor other devices -- such as low-cost media tablets -- for their mobility and convenience features.

In summary, the trend-setting U.S. PC market struggled in 2012, culminating with a 6.5 percent year-on-year decrease in the fourth quarter and -7.6 percent growth for the full year. Market saturation, a tough economic environment and weakness across the board, and lack of momentum for Windows 8, which led to 2012 contraction, are expected to persist at least during the first half of 2013.

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