Plummeting PC sales expose fiction of Windows 8 numbers

When major PC manufacturers report that first-quarter sales are down or flatlined, one has to wonder: Where are all the supposed Windows 8 licenses going?

Hewlett-Packard posted its quarterly results late last week, and the results paint yet another horrendous picture for the future of Windows. Lenovo posted first-quarter results last week as well, and while the picture from China isn't as dire, it's far from comforting. Windows 8 is in a nosedive, no matter how you look at it, in spite of Microsoft's remonstrations to the contrary.

Gartner and IDC (both of which I reference with no small amount of trepidation) say that HP sold the most PCs worldwide in the first three months of 2013. Gartner says the number of PCs sold fell 23.6 percent compared to the first quarter of 2012, and IDC pegs the number at 23.7 percent. HP's financial statement for the quarter ending April 30 (PDF) shows a 24 percent decline in revenue from "Personal Systems" -- desktops, workstations, and notebooks. Since HP's financial quarter lags the calendar quarter by one month, it's safe to assume the screaming roller-coaster ride for HP PCs is still headed steeply down.

Gartner and IDC say that Lenovo, the second-largest PC manufacturer, held its PC shipments steady year-to-year for the first quarter. Lenovo's earnings report (PDF) doesn't break out quarterly PC sales, but claims "strong PC shipments growth of 10 percent year-on-year." In other words, Lenovo's worldwide PC shipments from April 1, 2012 to March 31, 2013 were 10 percent higher than April 1, 2011 to March 31, 2012. Those numbers are in line with the analysts' reports of flatline PC sales in the first quarter of this year, compared to last year.

Some of Lenovo's reported growth (or lack thereof) in PC sales comes from its acquisition of CCE, a PC manufacturer and retailer in Brazil, the world's third-largest PC market. According to the last estimate I found, CCE was expected to sell 887,000 PCs in 2012. The CCE acquisition thus contributed at least 1 to 2 percent to Lenovo's flatlined quarter; if there had been no CCE acquisition, Lenovo's PC numbers surely would've shrunk.

Lenovo's growth in China isn't as great as some people assume. Lenovo's PC shipments in China grew 8 percent year-over-year for the quarter, "a significant result given that the overall China PC market was flat." It's entirely possible that China -- once thought to be the savior of the PC market -- has reached its zenith as well.

Lenovo benefits from an enlightened attitude toward installing and supporting Windows 7 on new machines and a surprising lack of concern about shipping "genuine" Windows with all of its new PCs worldwide. I confirmed that lapse last weekend at a major Asian computer mall.

One point worth pondering, from a Windows 8 point of view: Lenovo claims "consumer PC's unit shipments grew 22 percent year-on-year." Since total PC sales were up 10 percent, that speaks volumes about corporate PC unit shipments.

Dell, the third-largest PC manufacturer worldwide, embroiled in an internal struggle to go private, reported a 9 percent decrease in quarterly PC revenue, year-to-year (Dell's fiscal quarter ended on May 3, making comparisons challenging). Both Gartner and IDC put Dell's calendar Q1 unit shipments down about 11 percent from 2012.

Acer, No. 4 on both the Gartner and IDG lists, shows a huge drop in first-quarter shipments, at about 30 percent according to the analysts. Acer's seen the writing on the wall. Although the company apparently has a new 8-inch (1,280 by 800) Windows 8 tablet coming out soon, and Acer's president Jim Wong has toned down his anti-Windows 8 rhetoric, Acer's scrambling to sell $169 Android tablets.

At No. 5, Asus showed a considerable drop in PC shipments in the first quarter (3.5 percent according to Gartner; 19.2 percent according to IDC), but it has a tiger by the tail: According to the company's quarterly report, its Android-based "epad" sales accounted for 19 percent of Asus' Q1 sales, and that segment's revenue grew by 214 percent year-on-year. Asus sold 3 million tablets in the first quarter. (Can you spell "Nexus"?)

Windows 7 license sales were chugging along nicely at about 20 million per month last year. But this year, PC sales have cratered -- down anywhere from 9 to 30 percent from year-ago levels, depending on the manufacturer (except for Lenovo). How can that possibly be the case if, as Microsoft claims, Windows 8 shipments hit 100 million earlier this month, tracing the same sales arc experienced by the wildly successful Windows 7?

Short answer: It can't. Long answer: There's no way on earth Microsoft is selling as many copies of Windows 8 as it was selling Windows 7. Microsoft is undoubtedly using the same tricks I talked about six months ago. It's all fiction -- accounting smoke 'n' mirrors.

I have this recurring dream where a Microsoft exec asks one of the staff accountants, "How many copies of Windows 8 did we sell last month?" The response, with a grin: "How many would you like?"

The bad news keeps pouring in. Gartner's EU eulogy: PC shipments in western Europe were down 20.5 percent from Q1 2012 to Q1 2013. "Mobile and desktop PC shipments fell by 24.6 percent and 13.8 percent, respectively. Shipments to the professional PC market declined by 17.2 percent, while those to the consumer PC market decreased by 23.7 percent... HP and Acer both recorded declines of over 30 percent," Gartner reported.

We're just starting to see the devastating effect Windows 8 has had, not only on Microsoft but on the industry as a whole. And I wouldn't bet a feathered farthing that Windows Blue will make the situation any better. I predict a huge backlash if Microsoft puts a Start button on the old-fashioned desktop and ties it into the Metro Start screen. That kind of wretched experience and its concommitant bad publicity, like Chris Pirillo's iconic "Dad Test," will only make Windows 7 and XP users more cynical.

I'm sticking with my prediction that PC sales (net of returns) in 2013 will be around 20 percent lower than in 2012, except I'm starting to think the real decline might be closer to 30 percent.

While there are many contributing factors to the traditional PC business getting the stuffing knocked out of it, the Windows 8 train wreck has certainly accelerated the industry's hurtle into the abyss.

This story, "Plummeting PC sales expose fiction of Windows 8 numbers," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

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