If there was one thing that Microsoft could wish away, it would be the decline of worldwide PC sales. Microsoft’s Windows is still the dominant force in the PC world, accounting for nearly 90% of the market across different versions of Windows. But the problem for Microsoft is that PC sales have declined for five consecutive years. The slow decline has continued well into the first quarter of this year as PC sales slumped by 2.4% compared to last year.
Worldwide PC shipments totaled 62.2 million during the first quarter of 2017, a far cry from the 84.3 million units that shipped in 2011 – a drop of more than 1/4th of sales in six years. The problem is, no one knows if the bottom is near or how much further south it will go before finding a stable level.
Source: Microsoft Q2-17 Earnings Slide
Microsoft has, somehow, managed to survive the weakening PC market, even managing to post flat Windows OEM revenue growth during the first and second quarters of the current fiscal. But if the market keeps slipping by a couple of percentage points, Windows revenues will keep slipping further and further down.
The PC industry experienced modest growth in the business PC market, but this was offset by declining consumer demand. Consumers continued to refrain from replacing older PCs, and some consumers have abandoned the PC idea altogether. The business segment still sees the PC as an important device, and it is the main work device for businesses, noted Gartner.
As it stands, PCs have now been relegated to the office environment, while consumers continue to shun them. The root cause of this shift is the growth of smartphones and other mobile devices, which have greatly reduced the need to have a Personal Computer at home. With most of our time being spent on mobile devices, there is hardly the time or need for a home PC.
Just for comparison’s sakes, Apple sold 16 million more iPhones (78.29 million units) -a premium product with average cost of $695 – during the first quarter than the entire PC market (62.2 million units.)
Despite that decline, Microsoft has been able to hold steady until now, when its cloud-based revenues are beginning to offset the downslide in PC-based revenues. And that’s why Microsoft is being given a vote of confidence from its investors, who are continually pushing the stock to new 52-week highs.
Under the leadership of Microsoft CEO Satya Nadella, the Redmond giant has effected a massive maneuver by strengthening forward-looking segments like Azure and Office 365 to make up for what are now becoming its legacy lines – in other words, traditional Windows and Office licensing.
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