Wall Street must be pretty muted today. It has been a bad week with a lot of big companies calling out some pretty miserable results. IT companies are no exception, but we’re not going to talk about Twitter here. Instead, we’ll simply say Sony’s figures were so bad, that it has decided to pull out of the personal computer market.
It has also decided to pull out of the television manufacturing space, but we don’t really care about that. But PC’s are different though and the announcement by Sony comes just a day before Gartner published figures to show that the European PC market is down another 4 percent.
There are no recent figures for the US market yet, but they should land soon. While analysts will be looking desperately to find a silver lining, it’s a good bet that those figures are going to be pretty poor, too.
All that stuff about the death of the PC ... Maybe it really isn't exaggerated.
PC Market Decline
It’s an interesting time for those watching this market because the decline is more than just a reflection of the economic crisis. Rather, the shift reflects a fundamental change in the way we access information and collaborate with our colleagues.
For manufacturers that can’t keep up with that shift, it’s a disaster, and Sony’s figures show that. This quarter it expects to lose around $1.1 billion. The result is that it’s getting out of the PC market.
For all intents and purposes, it is the first household name that has decided to call it at day with PCs, and it’s possible that others will follow.
Sony is looking for a buyer for this business, although where that buyer might be is not at all obvious. Maybe China's Lenovo might take a shot at it — it seems to have some pretty deep pockets and a big investor with even deeper ones — but there are others that are still in the market despite the turbulence.
Google will own a 5.94 percent stake in Lenovo worth $750 million once Lenovo's deal to buy Google's Motorola handset division closes, according to a disclosure on the Hong Kong stock exchange.
Devices in 2014
It’s possible that PC makers are looking at Gartner’s post-Christmas predictions around the devices market that suggest that the decline in PCs had bottomed out. But things are still not looking good.
Gartner analyst Tracy Tsai predicted the global slide in personal computer shipments would slow in the fourth quarter last year to a 3 percent year-over-year drop, compared with an 8.6 percent year-over-year fall in the third quarter.
Gartner also predicts users will continue to move away from the traditional PC (notebooks and desk-based) as it becomes more of a shared content creation tool, while the greater flexibility of tablets, hybrids and lighter notebooks address users increasingly different demands.
European PC Figures
The figures Gartner just published bear this out, even if figures for the US are still not available. PC shipments in Western Europe totaled 14.7 million units in the fourth quarter of 2013, a decline of 4.4 percent compared with the same period in 2012.
However, PC makers might be able to take some consolation from the fact that it’s not just PCs that declined in the last quarter, but also mobile devices that suffered. In fact, over the quarter mobile devices declined 6.5 percent against a decline of 0.3 percent for PCs.
PC shipments in the professional PC market declined 1.7 percent, while the consumer PC market fell seven percent in the fourth quarter of 2013. Meike Escherich, principal research analyst at Gartner, said:
Shipments for traditional PCs (desktops and mobile PCs) in 2013 decreased 14 percent, but the rate of unit decline is moderate across geographies — which could indicate that the impact of tablets cannibalizing PC sales in mature markets is fading. Additionally, large numbers of professional PCs running on Windows XP remained in use, and the corporate market has been increasing its PC replacement — making up for a weak consumer PC market."
Could it be that Windows XP is throwing the PC market a lifeline? Probably not as the replacement cycle will have to come to an end soon rather than later, and the PC market will be back where it started.
In terms of PC makers, HP remained the No. 1 PC vendor in Western Europe, with HP, Lenovo and Asus strengthening their positions in the PC market at the expense of Samsung and Toshiba.
The battler for 5th position was fierce with Apple and Dell were very close in volume terms, but Apple won the No. 5 position in the fourth quarter of 2013 with double-digit growth in both the mobile and desktop PC markets.
Apple has a strong presence in the consumer PC market, while Dell's presence in the enterprise is strong. “If demand for business PCs is stronger than consumer PCs, we may see the ranking change next quarter," Escherich said.
So if there is some slight cheer for the PC market, the XP lifeline is very short and very thin. Sony, which was not a serious player, has opted out and while other smaller vendors have yet to say anything its possible there will be more causalities.
However, the economy is picking up, enterprises IT buying is expected to get back into gear this year and many consumers are expected to have more disposable income than they’ve had in a number of years. The remains to be see is whether PC makers can offer anything that will make them a little bit more attractive.
Title image by urbanlight (Shutterstock).