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Is the 'Peak PC' Period Over for Microsoft?

The PC market isn't the stronghold it used to be for Microsoft, but its current stumbles don't necessarily mean a long-term decline, according to one analyst.

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For more than 35 years, Microsoft's core vision held. I'll shorten it to "a PC on every desk." The idea drove Microsoft to world-beating market capitalization ahead of the dot-com crash. Microsoft's foresight and drive in leveraging that OS position allowed the company to take commanding positions in the office productivity and business server markets as well.

In a number of concrete ways, Redmond's desktop PC position is the reason that Microsoft is at the center of a huge partner ecosystem, and the Windows share of the market is critical for the success of many partner businesses -- even if those partners don't directly sell Windows.

Even after Microsoft's stock was no longer a darling and even when Windows Vista flopped, Windows PC shipments continued to go up and up and up.

The core vision prevailed as Microsoft's installed base of Windows PCs shot past 1 billion PCs and kept on going with seemingly clockwork double-digit shipment growth.

Then chinks appeared in three forms. There was the financial meltdown of 2007 and 2008 with its ensuing Great Recession that the global economy is still struggling to shake off. Corporate IT purchasing has yet to recover. Almost at the same time, smartphones and then tablets emerged as a major competitor for consumer PC-buying dollars.

For a while, this has meant PC sales growth waffling quarter-to-quarter between single-digit growth and slight declines. But in the latest quarter, IDC reported that PC sales actually plummeted by 14 percent -- the biggest drop since the market research firm started tracking PC shipments in 1994.

This got me wondering if "Peak PC" has passed. The phrase comes from the oil industry and a persistent idea that emerged again a few years ago, before the "fracking" boom. The concept is that we're drilling the most oil we can ever drill, and it's all downhill from here. Applied to PCs, it would mean people aren't buying new PCs fast enough to replace the ones heading for the recycling facility.

I put the question to analyst Al Gillen, who has been tracking Windows shipments at IDC since 1999. Gillen estimates the global Windows installed base is 1.56 billion clients. He's unequivocal about the direction of the installed base -- "it continues to go up" -- even if he feels the PC's prospects have been "reset."

"A lot of PC users were significantly overserved by their PC. If you use a PC mainly to browse the Web and do some e-mail, a tablet or a smartphone is effective for that consumption," Gillen says.

The sour economy and the tablet/smartphone boom have combined to stretch out the lifecycle of PCs, but the IDC view for now is that the PC will return to some form of growth after a pause because tablets and smartphones can't yet approach its productivity.

Do you think we're at "PC Pause" or Peak PC? Let me know -- e-mail me at sbekker@rcpmag.com.

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About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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