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Why the Drop in PC Demand will Continue during 2013

This is a very difficult time to be leading a personal computer manufacturer that didn't anticipate the shift in consumer demand from netbook PCs to media tablets. Besides, those leaders that didn't fully comprehend the rapid evolution of commercial cloud services have suffered the most.

Even those that had the foresight to see this shift coming may not have believed that the impact of the transition would be so swift and fatal to key segments of their legacy product portfolio.

Worldwide PC shipments totaled 89.8 million units in the fourth quarter of 2012 (4Q12), that's down by 6.4 percent compared to the same quarter in 2011 -- and worse than the forecast decline of 4.4 percent, according to the latest market study by International Data Corporation (IDC).

Although the quarter marked the beginning of a new stage in the PC industry with the launch of Windows 8, its introduction did not change sluggish PC demand, and the PC market continued to take a back seat to competing devices and sustained economic woes across the globe.

As a result, the fourth quarter of 2012 marked the first time in more than five years that the PC market has seen a year-on-year decline during the holiday season.

But the lackluster fourth quarter results were not entirely surprising -- given the perpetual challenges that the PC market faced over the course of 2012. Specifically, the initial high expectations for Ultrabooks quickly turned into one of the greatest anticlimactic events the PC industry has ever experienced.

IDC said they had expected the second half of 2012 to be difficult. Consumers as well as PC vendors and distribution channels continued to be diverted from PC sales by ongoing demand for media tablets and high-end smartphones. In addition, questions about the use of touch on Windows PCs vs. tablets slowed commercial spending on PCs.

"Although the third quarter was focused on the clearing of Windows 7 inventory, preliminary research indicates the clearance did not significantly boost the uptake of Windows 8 systems in Q4," said Jay Chou, senior research analyst at IDC.

IDC apparently believes that the current scenario is due to a marketing blunder. Lost in the shuffle to promote a touch-centric PC, vendors have not forcefully stressed other features that promote a more secure, reliable and efficient user experience.

IDC says that as Windows 8 matures, and other corresponding variables -- such as a significant drop in Ultrabook pricing -- the PC market can see a reset in both messaging and demand in 2013. That being said, I'm not as optimistic and I'd expect further indications that the downward trend isn't over yet.

"As anticipated, the U.S. market had a rough ending, dropping 4.5 percent in the fourth quarter and contributing to a decline of 7 percent for the full year 2012," said David Daoud, research director at IDC. "Consumers expected all sorts of cool PCs with tablet and touch capabilities. Instead, they mostly saw traditional PCs that feature a new OS (Windows 8) optimized for touch and tablet with applications and hardware that are not yet able to fully utilize these capabilities."

It may already be too late for some PC vendors to recover from this market transition with the usual new product announcements -- or the strategic acquisition of another company that's experiencing sustained growth. Moreover, a corresponding cloud services strategy seems to be a key component of future competitive positioning within this arena.

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