Red Lights Flashing Everywhere in the PC, Device Market
The mid-year tech spending estimate revisions are in, and the board is lighting up red.
With the benefit of two quarters of earnings data from the tech majors, IDC now sees worldwide PC shipments falling by 8.7 percent in 2015 and falling again in 2016 before a "modest recovery" possibly starting in 2017.
Tablet revenues are actually falling twice as fast as IDC had expected earlier. Shipment declines for 2015 are now projected at 8 percent, the Framingham, Mass.-based market research firm said Wednesday.
Even smartphones aren't matching expectations, although growth continues at a (barely) double-digit pace. IDC this week revised its year-over-year growth forecast for smartphones in 2015 downward from 11.3 percent to 10.4 percent.
'A Transition Period'
In a statement, IDC pointed to a number of factors that are driving sales downward that mostly boil down to major economic forces, the disruptive model of Windows 10 and the difficult comparables to the Windows XP end-of-life bounce.
"Although IDC had expected the second quarter of 2015 to be a transition period as vendors prepare for Windows 10 systems in the second half of the year, final results nonetheless shrank even more than expected due to a stubbornly large inventory of notebooks from prior quarters, and severe constraints posed by the decline of major currencies relative to the US Dollar," IDC noted. "In addition to economic issues, free upgrades of Windows 10, a relative dearth of newer models in the short term, and channels that are reluctant to take stock also makes the prospect of growth unlikely through 2016."
That IDC take was likely influenced by comments made last week on an HP earnings call by Dion Weisler, who will be CEO of HP Inc. when it splits off from Hewlett-Packard Enterprise.
"We did anticipate a challenging operating system transition to Windows 10 on two dimensions," Weisler said. "One was a free upgrade that was, of course, offered. And the second was the very short transition time, which is normally about three months, which was compressed to under one month. And what that drove was fairly high Windows 8 channel inventory levels, and that will take a little bit of time to flush. I guess the good news is that the Windows 10 feedback is pretty good, and a great operating system is important for the ecosystem in the industry. So once Windows 8 flushes, which may take a little time here in the industry, we should see some stimulation from Windows 10."
'The Space to Watch'
One area within the tablet market is doing well: the 2-in-1 segment pioneered by the Microsoft Surface. It's a fraction of the projected 212-million-unit-overall market for tablets, but it's moving quickly and IDC sees it as poised for 86 percent growth in 2015 to 14.7 million shipments.
"In the past, the biggest challenges with 2-in-1 devices were high price points, less than appealing designs, and, quite frankly, lack of demand for Windows 8, which was the OS most devices were running," said Ryan Reith, program director with IDC's Worldwide Quarterly Mobile Phone Tracker, in a statement. "With more OEMs offering devices in this segment, prices have started to come down significantly. We estimate that over 40 different vendors shipped 2-in-1 products in the second quarter of 2015, which is up from just 14 vendors two years ago. With the launch of Windows 10, the introduction of more Android-based products, and the possibility that Apple will unveil a larger, screen-detachable iPad, this is the space to watch."
The commercial market has been very reluctant to migrate toward tablets, and IDC believes this is largely due to an unclear value proposition. The 2-in-1 segment should find opportunities within the commercial market, but IT buyers have been slow to move toward mobile devices beyond smartphones and do not yet see tablets or 2-in-1s as a true PC replacement.
Jean Philippe Bouchard, IDC research director for the tablet market, sees commercial clients playing a crucial role in 2-in-1 demand after having mainly sat out the tablet craze to date.
"It will take some time but we expect that once IT departments are done evaluating Windows 10 and the awaited iPad Pro, they will start migrating some their portable PC and tablet installed base towards 2-in-1's, which will accelerate the adoption of the form factor," Bouchard said. "So far, this category has been the led by Microsoft with its Surface product line. But with the arrival of the iPad Pro, the launch of Windows 10, which is better suited for the 2-in-1 form factor, and the introduction of Intel's Skylake silicon, we expect a flurry of new devices to launch between now and December 2015."
For its part, Microsoft is priming its channel for Surface. In Microsoft's earnings release in July, COO Kevin Turner said, "We are also expanding the opportunity for more partners to sell Surface, and in the coming months will go from over 150 to more than 4,500 resellers globally."
Smartphones continue to be a two-horse race between the Android ecosystem and Apple iPhones, and the fates of those platforms determine the fate of the overall market, which is facing slowing growth in China. Microsoft is rumored to have a few new Lumias on tap, but its massive writeoff of the Nokia deal cast a cloud over its commitment to the market.
In the meantime, IDC's shipment and market share projection for smartphones for all of 2015 is 1.1 billion Android units (81 percent), 224 million iPhones (16 percent) and 37 million Windows Phones (less than 3 percent). "IDC's view that Microsoft/Windows Phone will remain a marginal challenger at best has not changed," the research firm said.
Posted by Scott Bekker on August 26, 2015 at 11:14 AM