News

Microsoft Bracing for Decline in PC Sales

• By Jeffrey Schwartz
• 01/12/2012

Microsoft officials said sales of PCs may have fallen more drastically than analyst predictions and that the decline will continue in the coming quarters.

On Wednesday, market watchers Gartner and IDC said PC sales in the fourth quarter declined 1.4 percent and 0.2 percent, respectively. However, the actual shortfall could prove to be greater.

Tami Reller, CFO and chief marketing officer of Microsoft's Windows and Windows Live Division, and Bill Koefoed, Microsoft's general manager of investor relations, suggested that PC sales were perhaps lower than analysts are projecting.

"As the numbers come out, you'll likely see that number decline further as the impact has been felt faster than people had anticipated," Koefoed said, speaking at a JPMorgan Chase conference, Bloomberg reported.

Reller, who demonstrated Microsoft's forthcoming Windows 8 operating system and showcased new Windows 7-based PCs during CEO Steve Ballmer's Consumer Electronics Show keynote Monday night, also looked to temper expectations. Reller said at a Nomura Holdings conference in Las Vegas on Tuesday that PC shipments were probably lower than analysts have projected for the fourth quarter. The pipeline for the next few quarters remains uncertain, Reller indicated.

Microsoft is expected to provide a more specific picture when it announces its second quarter earnings on Jan. 19.

"Continuously low consumer PC demand resulted in weak holiday PC shipments," said Gartner analyst Mikako Kitagawa in a statement. Enterprise sales and growth in emerging markets were healthy, according to Gartner, but not enough to offset the sluggish consumer demand.

Demand in the coming quarters may be weak as the October floods in Thailand continue to disrupt the supply chain for hard disk drives (HDDs). Gartner and IDC indicated the continued growth of tablet devices such as iPads and consumers awaiting the arrival of Windows 8 are also cutting into PC sales.

"The industry still needs to work through some key hurdles in 2012, including recovery of HDD supply, the launch of Windows 8, and successful evolution of PC design to become still more mobile," said IDC analyst Loren Loverde in a statement. "Despite the challenges, the industry appears to be on the right path, and will be poised for substantial double-digit growth after working through these issues in 2012."

IDC is projecting PC sales growth will rebound by the fourth quarter of this year, posting growth of 15 percent. For the year, IDC is forecasting 5.4 percent growth. In 2013, IDC anticipates PC sales will grow 11 percent for the year.