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April 5, 2013

Continued Rise of Tablets Bad News for Microsoft

Gartner Predicts PC Market to Decline 7.6 Percent in 2013

The future will not be bright for Microsoft unless the software giant can make its mark in the tablet and Smartphone sector in the next four years, research firm Gartner is predicting.

The PC market will continue to shrink as production of lower-priced tablets with increased capabilities continues to grow.

“While there will be some individuals who retain both a personal PC and a tablet, especially those who use either or both for work and play, most will be satisfied with the experience they get from a tablet as their main computing device,” Gartner research vice-president Carolina Milanesi said in a report.

“As consumers shift their time away from their PC to tablets and Smartphones, they will no longer see their PC as a device that they need to replace on a regular basis.”

As a result, the traditional PC market of notebooks and desk-based units is expected to decline 7.6 percent in 2013. According to Gartner, this is not a temporary trend caused by a slow economy, but a reflection of a long-term change in user behavior.

 

Worldwide Devices Shipments by Segment (Thousands of Units)

Device Type

2012

2013

2014

2017

PC (Desk-Based and Notebook)

341,263

315,229

302,315

271,612

Ultramobile

9,822

23,592

38,687

96,350

Tablet

116,113

197,202

265,731

467,951

Mobile Phone

1,746,176

1,875,774

1,949,722

2,128,871

Total

2,213,373

2,411,796

2,556,455

2,964,783

Source: Gartner (April 2013)

 

Shipments of tablets will exceed those of traditional PCs such as desktops and notebooks by 2015, as the dominance of Android and Apple’s iOS continues to grow. Android in particular will be installed on more than one billion devices shipped in 2014, said Milanesi, the lead analyst on the project.

In fact, shipments of Android devices will eclipse those of Windows PCs and Smartphones by 2017, the report indicated. Microsoft device shipments will drop to be practically parallel with that of Apple’s iPhones and iPads as fewer and fewer desktops are sold. Microsoft has been ahead of Apple for more than two decades due to its PC sales but, unless Microsoft can dramatically increase its mobile sales that trend will soon end, the report revealed.

Microsoft already is feeling the crunch — its shares are down roughly nine percent year-over-year while Android creator Google’s shares have skyrocketed more than 25 percent in the past year.

Apple’s shares have dropped too, but not for the same reasons. While Microsoft is battling to remian relevant, Apple’s stock decline is due chiefly to leadership changes and increased competition, although its profits continue to be overwhelming.

Worldwide Devices Shipments by Operating System (Thousands of Units)

Operating System

2012

2013

2014

2017

Android

497,082

860,937

1,069,503

1,468,619

Windows

346,457

354,410

397,533

570,937

iOS/MacOS

212,899

293,428

359,483

504,147

RIM

34,722

31,253

27,150

24,121

Others

1,122,213

871,718

702,786

396,959

Total

2,213,373

2,411,796

2,556,455

2,964,783

Note: Devices include notebooks and desk-based PCs, tablets, ultramobiles and mobile phones.

Source: Gartner (April 2013)

In the short-term, ultramobiles will help offset the PC decline so that sales of traditional PCs and ultramobiles combined show a 3.5 percent decline this year, but it will continue to decline each year afterward and at a more rapid pace.

Worldwide tablet shipments, meanwhile, are forecast to total 197 million units this year, a 69.8 percent increase from 2012 shipment rates of 116 million units.

“Lower prices, form factor variety, cloud update and consumers’ addiction to apps will be the key drivers in the tablet market,” said Gartner research director Ranjit Atwal. “Growth in the tablet segment will not be limited to mature markets alone. Users in emerging markets who are looking for a companion to their mobile phone will increasingly choose a tablet as their first computing device and not a PC.”

Tablets are not the only device “seeing aggressive price erosion.” Of the 1.875 billion mobile phones to be sold in 2013, 1 billion units will be Smartphones, compared with 675 million units last year.

“The trend toward Smartphones and tablets will have much wider implications than hardware displacement,” said Milanesi. “Software and chipset architecture are also impacted by this shift as consumers embrace apps and personal cloud.”

 

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