I have had the privilege of covering the PC market from its birth. In fact, my first project was working with the team that created the original IBM PC and I got to deal with Don Estridge and Bill Lowe, the two men inside IBM who had the vision to create a PC when everyone thought the PC was strictly for hobbyists. Over these 30+ years, I have seen the PC industry explode and grow and, at its peak, sold about 400 million PCs a year. The PC and IT industry became a trillion dollar business.
But the days of spectacular PC growth are well behind us. It is currently going through its most turbulent time since its beginning. Over the last 5 years, demand for PC’s has declined steadily. A lot of things have contributed to this, including tablets and smartphones that have become more convenient ways to connect. It has somewhat relegated the PC to being a productivity tool instead of the front end to apps, the internet, and online services it was used for in the past. The good news is there is still a demand for PCs and laptops for use in business, education, and even in homes where they are used to manage the family’s finances, media collections, etc. The bad news is the decline in demand for PCs continues and I don’t see it ever growing again.
Indeed, Gartner said during the last quarter that PC sales declined -9.8% and IDC said they were down -11.4%. If this holds true, that translates into the entire PC sales being off at least -3% to -5% for all of 2015. In pure numbers it means the industry will sell only about 290 million PCs overall and Apple will sell 16 million of that.
These negative numbers suggest two key things to me. The first is it is becoming much clearer that, at best, the PC industry will settle into about a 280 million to 300 million per year cycle going forward. This is still a good market for some key players and, when they add services and cloud-based solutions to their offerings, Dell, HP, Lenovo and Apple are well positioned to become the consistent suppliers of PCs for the foreseeable future. But the second thing these numbers suggest is, if you are a PC vendor and only sell PCs, your days are numbered. Over the next 2-3 years we will see the next wave of consolidation that most likely will take Toshiba, Acer and Asus completely out of the PC market. Toshiba is already losing market share and the current accounting fiasco that cost their CEO his job will make it tougher for Toshiba to get back to profitability any time soon. Added to the continual decline of PCs and Toshiba could have a tough time competing in the future. Acer has also had a lot of turmoil in leadership and, while their current management has stabilized the company and their PC business is slightly growing again, the lack of services and cloud solutions will eventually impact their ability to survive in the long term as well. As for Asus, their PC business is not that large and they have already diversified but what PC business they do have will be challenged as demand decline. Even the “other” category of PC suppliers, those creating white box PCs and have a large chunk of the PC business, are being challenged these days.
That means the last man or companies standing most likely will be Dell, Lenovo, Apple and hopefully HP. I say hopefully because HP just spun out their PC and printer business and many analysts question whether this will work. As stated above, for a PC company to be strong, they need to offer solutions and services tied to their PC offerings, especially in business. With the split, the HP PC division is focused on PCs while the other HP division has servers and services solutions. The PC group’s success will be determined by how well they can still tap into the HP enterprise and solutions division, which now has its own P&L and their own strategic objectives.
The PC market and its dynamics have really changed over the last 5 years and the PC vendors are starting to come to grips with that. It is still a good business for the big guys and for those who can innovate but, in the end, I see only 3 or 4 major PC vendors surviving and thriving. Consolidation just around the corner.