Shortages of touch-enabled Windows notebooks led to a steeper-than-expected decline in PC sales last quarter, an analyst said.
According to IDC, global PC shipments in 2012's fourth quarter fell 6.4% compared to the same period in 2011, a larger decline than the 4.4% downturn the research firm had forecast before year's end.
The data was no surprise, as others have pointed out sluggish PC sales for weeks. The NPD Group, for example, said US sales during the 2012 holidays were down 11%, and like IDC, pinned some blame on shortages of touch-equipped hardware.
IDC followed other research firms in noting that Windows 8, which was once expected to provide a sales pop near year's end, did nothing of the sort. Even Windows 8's release could not rewrite a litany of bad news, with the quarter ending as the first holiday period in five years to post a year-over-year decline in personal computer sales.
There's plenty of blame for the poor showing to go around, IDC analyst David Daoud said at the end of last week. But while Microsoft must assume some blame, he found the most fault with OEMs, or "original equipment manufacturers," the computer makers like US-based HP and Dell, as well as Asian companies like Lenovo, ASUS and Acer.
"A great deal of Microsoft's marketing campaign featured a great deal about touch, but when you went to retail, you didn't find that," said Daoud. "You found notebooks that looked just like ones from two, three years ago."
Promised - or at least told - that touch was key to Windows 8, and would revolutionize how they used a PC, consumers walked into stores, but couldn't find a touch-enabled system, one that fit their budget, or an inspired design different from what they already had. So they walked out without buying.
"What they saw were standard laptops, ones clearly not optimised for the tablet experience," said Daoud. "OEMs didn't deliver."
Microsoft did its part by creating a touch-oriented OS - Daoud called it "terrific" - but computer makers dropped the ball.
Yet, even they had their hands tied to some extent. "Glass is a constrained market," Daoud said of so-called "One Glass Solution" (OGS) touch screens, which combine the touch sensor layer with the protective glass that covers the display. "They're pretty comfortable handling the smaller devices like smartphones and tablets, but it's taking them a little bit of time to ramp up for larger screens, like those for notebooks."
In a nutshell, Daoud believed that Microsoft made the right bet on touch, and that consumers responded. But they were unable to find the systems that had been so heavily touted. And without machines with touch capabilities, they saw no reason to spend money on a new PC - not after hearing about difficulties running Windows 8 with the mouse and keyboard or experiencing that themselves when trying out PCs at retail.
Microsoft has said much the same. Last week Tami Reller, CFO and chief marketing officer of the Windows division, said that Windows 8 was unable to spark sales because touch-enabled PCs, particularly notebooks, were in short supply.
Still, Microsoft wasn't blameless, said Daoud, who cited the company for an inability to coordinate a successful launch of Windows 8. "It's much more complex than just putting together an OS, although that is terribly complex," said Daoud. "There's the execution part of it, coordinating OEMs, suppliers and retailers. Where was the flawless execution?"
Microsoft clearly didn't execute on Windows 8's launch, Daoud continued, and that showed in the fourth quarter's numbers.
Like others, including Microsoft's Reller, Daoud was optimistic about Windows 8's long-term prospects and its ability to revive PC sales. Display manufacturers will step up production, OEMs will deliver innovative touch notebooks and buyers will return, he predicted. The first half of 2013 will retain tough, but Daoud said there's a chance everyone will get their acts together by summer, when the back-to-school sales season begins.
IDC's data does not bode well for Microsoft's fourth-quarter earnings, slated for release on January 24. The Windows group's revenue typically tracks with PC sales - when system sales are down, so are sales of Windows, and vice versa - a fact the firm has made clear time and again during the latest run of low or no growth.
If Windows revenue for the quarter drops 6% year-over-year, Microsoft will post sales of $4.46 billion, down from 2011's $4.74 billion. The $4.46 billion would represent a 35% decline from Windows' revenue in the fourth quarter of 2009, the three-month span that included the launch of Windows 7.
Other data supports that scenario. Online usage measurements, for instance, have showed that Windows 8's usage during its first two months has lagged far behind Windows 7's at the same point in its release.
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