"Analyst firms have been expecting the PC industry to rebound for more than a year now," said Sameer Singh, an analyst who writes on the Tech-Thoughts blog. "I don't expect that to happen as the reason for this decline is an irreversible, secular shift in computing patterns."
From PCs to tablets
The shift Singh referred to was the one from traditional PCs to tablets. And in some cases -- particularly in emerging markets where PC ownership has never gained a foothold -- the pattern entirely abandons the idea of personal computers in favor of smartphones, and then as the logical upgrade, tablets.
Tablet shipments, said Singh, may outstrip PCs as early as the third quarter of this year, and no later than the fourth quarter.
Singh dubbed the trend "tablet-PC replacement rate," and believes it points to the real possibility that PC shipments will, rather than uptick at some point, continue to contract, perhaps to a point where they average between 65 and just over 70 million units per quarter. If accurate, that would return the PC industry to shipment volumes of 2007-2008, and represent as much as a 28 percent contraction from peak PC.
O'Donnell acknowledged the crystal ball remain cloudy, but said it's certainly possible that the PC business might settle at 20 percent below peak PC, or around 290 million systems shipped annually. "That could be the level, stable reality," O'Donnell said.
Neither O'Donnell nor Gillen was convinced that PCs would disappear or mutate to the point where they become unrecognizable, making the point -- long argued by Microsoft and Apple, among others -- that there will remain tasks that more-or-less traditional PCs are better suited to handle than tablets.
"As people spend more and more time with tablets, I think they will come to realize that [tablets] are not really a PC replacement," said O'Donnell, taking the opposite side of the debate from Singh.
Longer replacement cycles
O'Donnell's faith in the survival of the PC, albeit at a reduced rank, is based on the belief that while replacement cycles have lengthened -- as users let more time go by before buying a new personal computer -- those cycles will eventually stabilize.
Of all technology companies, peak PC has to be foremost in Microsoft's mind. That explains the urgency in Microsoft's shift to, in the refrain of CEO Steve Ballmer, a "devices and services" business model.
For Gillen, the de-emphasis of the Windows client under Microsoft's new strategy is a logical reaction to Peak PC. "The lost momentum [of PC shipment growth] means Microsoft was not able to grow its Windows client business," said Gillen, a big problem for a publicly traded company where financials are scrutinized every quarter. "But by putting the operating system businesses together, Microsoft can essentially offset the decline of the PC client with gains coming from mobile. It's a more holistic view."
Gillen was referring to Microsoft's announced reorganization, which will combine Windows 8, Windows RT, and Windows Phone -- but not Windows Server -- into a single unit: the Operating Systems Engineering Group, headed by Windows Phone boss Terry Myerson.
Microsoft has time
And Microsoft has time to make the strategy work, Gillen maintained. "People are not going to suddenly stop using Windows," he said. "Windows will be around as long as PCs continue to sell. This takes some of the pressure off so they can focus on the longer-term [devices and services] strategy."