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No cheer for PC sales

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 11 Jan 2013
The PC market continued to take a back seat to competing devices and sustained economic woes, says IDC.
The PC market continued to take a back seat to competing devices and sustained economic woes, says IDC.

PC sales slumped 6.4% in the last quarter of 2012, as the sector battled to keep up with competing devices, such as tablets, and shrug off economic woes.

Total PC sales in the last quarter of the year reached 89.9 million units, and the slump was worse than the initially expected decline of 4.4%, says research house IDC. The fourth quarter of 2012 was the first time in over five years that the PC market experienced a year-on-year decline during the holiday season, it says.

A few months ago, IHS iSuppli Compute Platforms Service, at information and analytics provider IHS, said the total market for 2012 was expected to shrink 1.2%, the biggest decline in a decade. IHS has not yet released new figures, and neither has IDC competitor, Gartner.

Slower PC sales are being blamed on the failure of Microsoft's first new operating system in three years - Windows 8 - to gain traction, as well as a growing shift towards tablets, and the general economic slowdown, which has weighed on global economies for almost four years.

However, the pending release of Windows 8 aided suppliers and the channel in clearing out inventory levels, which were approaching concerning levels, in the third quarter.

Taking strain

Although the last quarter of 2012 marked the beginning of a new stage in the PC industry with the launch of Windows 8, its impact did not quickly change recently sluggish PC demand, says IDC.

It notes that the PC market continued to take a back seat to competing devices and sustained economic woes. In the latter half of 2008, the world was plunged into an economic crisis that saw the collapse of US banking giants such as Lehman Brothers.

"The lacklustre fourth quarter results were not entirely surprising given the spate of challenges the PC market faced over the course of 2012. IDC had expected the second half of 2012 to be difficult," it says.

IDC notes that consumers, PC vendors and distribution channels continued to be diverted from PC sales by ongoing demand for tablets and smartphones. In addition, questions about the use of touch on Windows PCs versus tablets slowed commercial spending on PCs.

Locally, The Notebook Company MD Christopher Riley says laptop demand will be sluggish in the first quarter of this year, and was already moving downwards before the tablet industry caught fire.

Cleaning house

The third quarter of last year was focused on clearing out stock of PCs loaded with Windows 7 before the Windows 8 launch about 10 weeks ago. Reuters recently reported that Microsoft has sold 60 million licences and upgrades for Windows 8, but that Windows 8 sales were growing in line with those of Windows 7.

"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," says Jay Chou, senior research analyst with IDC's Worldwide Quarterly PC Tracker.

"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. As Windows 8 matures, and other corresponding variables such as ultrabook pricing continue to drop, hopefully the PC market can see a reset in both messaging and demand in 2013."

While the launch of Windows 8 at the beginning of the fourth quarter trimmed third quarter stocks, the new operating system's effect on other parts of the PC supply chain were more ambiguous, as inventory levels rose in other related nodes, according to an IHS iSuppli Inventory Insider report.

Inventory at PC original equipment manufacturers (OEMs) at the end of September fell to 25.6 days, down from 28 days in the second quarter, based on the days of inventory (DOI) measure traditionally used to keep track of chip or product stockpile quantities in the industry.

The reduction was a welcome development, especially as DOI among PC OEMs in the second quarter had risen to elevated levels not seen since 2008 just before the economic recession, and was starting to prompt concern, notes IHS. After the selling, the third-quarter DOI for PC OEMs was back to where it was in the first quarter, at 25.6 days, just slightly above what the industry considers as the normal stock-keeping DOI of 25.4, it adds.

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