Last week, PC industry bulls were hit with a major shock after NPD released some critical data regarding the reception to Microsoft's
(NASDAQ:MSFT) Windows 8 following its October 26 release.
According to NPD, US Windows Device Sales fell 21% year-over-year during the initial four-week sales period. Notebook sales dropped a whopping 24%, while desktops decreased by 9%.
And during this period, just 58% of Windows buyers opted for Windows 8. The last time around, Windows 7 accounted for 83% of sales. NPD also said that Windows 8 tablet sales were "almost non-existent," echoing some Wall Street analyst reports which indicated that Microsoft Surface tablet sales were very weak on Black Friday.
Earlier in November, Microsoft CEO Steve Ballmer told the French newspaper Le Parisien
that Surface sales were off to a modest start. Now there's a possibility that Ballmer was playing rope-a-dope in the name of keeping expectations low, but that's unlikely; if Surface were selling in large numbers, Microsoft would be obligated to let the public know to build confidence among app developers.
As it stands now, Surface does not have native Twitter or Facebook
(NASDAQ:FB) apps, which is fairly strong evidence that Windows is pretty low on the totem pole in mobile.
Surface's likely disappointment -- we don't have definitive numbers yet, but the picture isn't pretty -- is easily explained by the Apple
(NASDAQ:AAPL) iPad's runaway momentum, and competition from Google
(NASDAQ:GOOG) Android tablets from the likes of Samsung
(NASDAQ:AMZN), and Barnes & Noble
That explains away the Surface issues.
But what's going on in PCs? Why didn't sales rebound with Windows 8?
PC sales have been lousy for several quarters, which could have meant one of two things:
1. people were waiting for Windows 8, indicating pent-up demand ready to be unleashed, or
2. there was a disturbance in the PC industry.
As you can tell by the title of this article, I'm voting for the second.
Let's fire up the time machine and head back to 2009 for the release of Windows 7.
In Q3 of that year, the quarter preceding the Windows 7 release, PC sales rose 0.5%, according to Gartner. But in Q4, PC sales rocketed up 22%. A major factor in that improvement was the easy year-over-year comparison (Q4 of 2008 was disastrous for PCs), but still -- 22% unit growth isn't bad for a relatively mature market.
So cycle-over-cycle, PCs are looking pretty lousy, especially when you consider that, like Windows 7, Windows 8 faces an easy year-over-year comparison. In Q4 of 2011, PC sales fell 1.4%, so it's not like there's a need to top a spectacular year.
We're not doing an apple-to-apples comparison here as we're comparing Gartner's quarterly global data to a slice of NPD's weekly US data, but it's obvious that PC sales trends look just plain bad relative to what we saw with Windows 7. And now, please indulge me while I take a trip down memory lane.
When I was a kid back in the 1980s, in my middle-class Brooklyn neighborhood, it was a big, big deal when someone owned a computer because they were so expensive. I rarely saw computers outside of school.
But in the 1990s, when the Internet came along and prices dropped, people that were not wealthy and/or nerdy had good reason to buy a computer. In the blink of an eye, everyone started buying computers, and the industry exploded.
But when everyone finally owns something, it becomes less exciting and maturity starts to set in.
These days, the PC is basically a toaster. It's not a source of interest in and of itself -- it's a tool for getting a job done.
My toaster makes toast. And my computer allows me to consume media, use social networks, edit photos.
The market has shifted far, far away from people who were interested in computers themselves to folks who simply use them to complete a task.
In my mind, that makes the PC something you simply replace when it breaks -- just another household appliance that is purchased for logical (as in, not emotional) reasons.
But think about what's going on in mobile.
Does any owner of an iPhone 4S really need
an iPhone 5? Does anyone really need
to upgrade to the latest iPad?
Nope, but smartphones and tablets are still in their high-excitement phase, and that means emotional purchases that build real momentum -- just like PCs in the '90s when the Internet hit, or in 2006-2008 when motion-controlled video games boomed.
And that's why things really are different this time for PCs. There are only so many emotional dollars to go around, and an absolute ton of them are now going to the current class of exciting gadgets -- Apple and Android-powered mobile devices.
Position in AAPL
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