Fears for Microsoft’s quarterly earnings as global PC sales decline

By Tom Warren, on 14th Apr 11 3:35 pm with 10 Comments

Microsoft’s 2011 third quarter earnings may be affected by a global decline in the PC market.

Market research firm IDC released its latest Worldwide Quarterly PC tracker results on Wednesday. IDC says global PC shipments declined 3.2% during the first quarter of 2011, compared to the same period last year. IDC originally forecast a 1.5% growth in shipments. “A spike in fuel and commodity prices and the disruptions in Japan added to the mix, further dampening a market struggling to maintain momentum,” says IDC.

Worldwide, HP held onto the top spot despite a decline of 2.8% shipments. In the U.S. alone, only Toshiba and Apple had percentage growth in Q1 2011 compared to Q1 2010. IDC stopped short of blaming strong sales of Tablets for the decline in PC sales.

“While the consequences of events in the Middle East and Japan remain unclear, these will surely be factors that will influence short term market performance for 2011,” said Jay Chou, senior research analyst with IDC’s Worldwide Quarterly PC Tracker. “Long-term success will depend on hardware manufacturers being able to articulate a message that is beyond simple hardware specifications. ‘Good-enough computing’ has become a firm reality, exemplified first by Mini Notebooks and now Media Tablets. Macroeconomic forces can explain some of the ebb and flow of the PC business, but the real question PC vendors have to think hard about is how to enable a compelling user experience that can justify spending on the added horsepower.”

Microsoft’s earnings rely heavily on software sales of Windows and Office, key components for modern PCs. The software giant is due to reveal its fiscal 2011 third quarter earnings on April 28 and analysts will expect a tough quarter for the company. Microsoft has so far failed to respond to the onslaught of Tablet devices. Android Tablets and Apple’s iPad device are currently hogging the headlines across the tech industry as Microsoft prepares its next-generation of Windows. Microsoft unveiled its Internet Explorer 10 software earlier this week and took the time to show off an early ARM based version of Windows. Microsoft is currently working on a Windows 8 “immersive” tablet user experience. However, the company may introduce Windows 8 ARM based tablets ahead of a full desktop release. Microsoft’s competitive tablet strategy is believed to be further along than expected. Dell’s recently leaked Tablet Roadmap revealed that the OEM has marked Q1 2012 as its date for a Windows 8 based slate. WinRumors understands that Microsoft has been working on an ARM based version of Windows for nearly a year and that it is laboring hard to bring this to the market as soon as possible.

IDC Worldwide Quarterly PC Tracker, April 2011

  • http://www.Nave360.com Sebastian Gorgon

    Looking at that no wonder HP has these 40% off on some laptops,

    • Anonymous

      i think this will have a negative affect to microsoft bottom line… they been growing in other sectors, i.e. search and entertainment division..

    • Joe05

      Microsoft has a lot of enterprise level Businesses as well, I don’t think that should affect them.

    • Mark

      That can offset some of the weakness because a lot of it is pre-contracted via multi-year agreements, but several analysts have dropped the EPS estimates as a result of these recent weak PC numbers. So it likely will have a net negative impact. And there are concerns it may signal the end of growth for the Windows business, which in turn would be a huge problem for MS overall:

      http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/04/14/businessinsider-mcnamee-on-microsoft-2011-4.DTL

  • David G.

    I still can’t believe that the company that championed Tablets/slates for so long, has fallen so far behind. They really need to get into the tablet market quickly with something amazing.

    • Mark

      What’s not to believe? Under Ballmer, MS has been falling behind for a decade.

  • Gsrid1968

    Also to be considered is that most smartphones can do what entry-level PCs can do. As smartphones continue to scale up,I wonder what impact they will have on tablets since there is so much cross-over in terms of functionality

  • Anonymous

    I haven’t bought a new pc in years, i bought AM2+ to last two cycles and its done so remarkably. I went from a Phenom 9600 to a Phenom II 955. I have however gone from XP to Vista and Windows 7 though. These predictions reflect none of the ‘pro-sumer’ market and the general reduction in pc sales because the floor of computing power is already astronomical and nothing really short of server requirements or ultra high end gaming will push those requirements.. of which both are excluded form these market predictions

  • http://profiles.google.com/bob.bobson52 Brian Spencer

    I don’t think smartphones and tablets are affecting PC sales – at least not yet. Although tech-savy people can say “yeah, this thing’s as good as a netbook” or something to that affect, consumers see tablets and smartphones in a different category as PCs. I don’t think it’s to the point yet that people will weigh them against eachother when looking to buy a PC- in other words, a PC’s a PC, a smartphone’s a phone, and a tablet’s a gadget. They each have their own category and market.

  • Mobile Warrior

    PC vendors need to add something to make PC’s new and exciting again, so people have a reason to buy a new one. Faster processors, more memory or bigger hard drives aren’t interesting anymore. If PC vendors added touch capability to all laptops and allowed them to act as both a laptop when open and a tablet when closed, then people might have the desire to upgrade to a laptop that has touch capability instead of running out to buy a tablet.