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What If the PC Never Bounces Back?

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There won't be much of a bounce for the struggling PC market immediately after Microsoft's (Nasdaq: MSFT  ) Windows 8 hits the market in a few weeks.

Industry tracker IDC now sees worldwide PC unit growth climbing a mere 0.9% for all of 2012. Things are even bleaker closer to home. IDC's research points to a forecast calling for a 3.7% decline, marking the second consecutive year that desktop and portable PCs have fallen.

The only real surprise in IDC's study is that it sees reasonable shipment growth in the years to come. IDC forecasts a compound annual growth rate of 7.1% from 2013 to 2016. Its previous projection called for a heartier 8.4% growth rate from 2012 through 2016.

Don't be surprised if that 7.1% figure is whittled down as time goes by.

The box makers are in trouble. There's a reason the market shook its head at Dell (Nasdaq: DELL  ) and Hewlett-Packard (NYSE: HPQ  ) last week after they posted disappointing quarterly results. Dell and HP saw PC sales fall 14% and 10%, respectively.

It's true that computer manufacturers are holding back on shipments ahead of Windows 8, but what if the demand isn't there?

It's easy to point to the sovereign-debt crisis in Europe and general slowing in Asia, but the bigger culprit here appears to be the mobile trend that finds consumers relying on smartphones and tablets for their basic computing needs. This is obviously bad news for Microsoft, Dell, and HP, which have really failed to make a dent in these "good enough" computing gadgets.

Isn't this what's really slowing the PC industry? All of the arguments blaming the slowdown on the global malaise fail to explain why consumers are gobbling up devices powered by Apple's (Nasdaq: AAPL  ) iOS and Google's (Nasdaq: GOOG  ) Android.

There's clearly a hearty appetite for Android smartphones and Apple tablets. The rush to buy a new computer -- even after Windows 8 hits the market -- isn't likely to be there in a sustainable way. There will be steady demand for PCs in the corporate market, but the consumer has moved on for the most part.

The desktop and laptop markets aren't going to bounce back.

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The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Apple, creating a synthetic covered call position in Microsoft, and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 27, 2012, at 11:42 PM, techy46 wrote:

    Enterprises will kind of become trapped by hardwrae versus software obsolescence. Once you keep the unit so long it doesn't pay to upgrade hardware without software and vice versa. Delaying for a year or two will just kick the can down the road leading to larger growth farther out.

  • Report this Comment On August 28, 2012, at 8:11 AM, jdmeck wrote:

    The desktop is dead or dying. Many large companies are switching to laptops and docking stations. The PC as a laptop will not die but don't expect any growth. Only a spurt here and there as the economy improves.

  • Report this Comment On August 28, 2012, at 8:42 AM, Secs27 wrote:

    If one is simply surfing the Internet or writing emails, then a tablet is fine. But if one needs to do word processing, reord keeping or even home accounting, a computer is still needed.

    I recently purchased four new iPads for my family, however they do not take thelace of my laptop and desktop. At home, my desktop is used for accounting records (Quicken) and lots of record keeping and word processing. Our laptop is used for office work and a database. While the iPads are great, they simply cannot replace a computer. Microsoft has a great idea with the Surface combining the beauty and portability of an iPad with the power and ports of a full blown computer. This may be the first device that can replace both my iPad and my computer. I believe there will always be a need by many consumers for a pc either in desktop or laptop form or purheps now Surface form.

  • Report this Comment On August 28, 2012, at 9:17 AM, TerenceFL wrote:

    Sorry, but the steady increase in Mac sales gives the lie to this idea. The real truth is that Microsoft-based devices are losing in general to Apple- and Google-powered devices, whether they be mobile or not.

    The PC companies for years have operated on low margins, high volumes, and NO innovation, aided and abetted by Microsoft. Apple made two genius moves: the design of iPhone and iPad hardware, and the development of the App Store to combat the massive catalog of PC-based software. This is what is killing MS and the box makers.

  • Report this Comment On August 28, 2012, at 10:07 AM, Secs27 wrote:

    To Terencefl. I don't know what lie your seeking of.

    The reality is that apple computers do nothing better than Microsoft computers. In fact, Windows 7 is a tremendously powerful OS and I much prefer it to the AppleOS. I recently looked at the Mac book pro vs the hp dvt7. The hp was more powerful with more memory than the Mac. Why would I want to pay $2500 for a computer that will be obsolete in a year when I can spend $1000 for the HP which was a far more powerful machine. The hp boots up in 39 seconds while the Mac pro takes 51.

    I also think the Androd OS is horrendous and I am not a fan of Google. Bing and duck duck go have become have become better search engines and googles chrome is unstable and constantly crashes. Android I'd also constantly crashing on my Samsung Galaxy III phone.

    I have returned it bought an iPhone. It is by far the best phone I have ever used. However, my wife's Nokia windows phone is unbelievably stable smooth and fluid. It puts android to shame.

    Currently, the iPad has no equal. However, the Surface appears to be a formidable device and I am interested in purchasing the Pro version. In summary, I dont believe that a Mac does anything superior to a windows machine. I have used both and windows 7 s superior. Apple does have the edge with their iPad and iPhone. I know in my household, there is a great need for both a desktop and laptop as well as a tablet. Currently the iPad is superior, but if the Surface proves to be better, I'll make the switch. Many people I have spoken to would love to have a tablet with the power of a pc and they have been dissatisfied with the capabilities of the iPad. I'd enjoying hearing what the Mac computer does better than a windows computer. no Mac fan has been able to elaborate.

  • Report this Comment On August 28, 2012, at 2:27 PM, TheRealRacc wrote:

    Mac's have such a wide-ranging consumer appeal for the same reasons that Fifty Shades of Gray has been a top-seller.

    Have you ever read a page of that book? The writing is plain, simple, and dumbed down so borderline illiterates can still comprehend the story.

    I have always wondered why some of the most popular Hollywood blockbusters are surprisingly bad movies.

  • Report this Comment On August 28, 2012, at 5:29 PM, johnluma wrote:

    The PC makers can continue their growth if they combine their PC laptop and tablet expertise in one "must have" foolproof machine. That's where the future is headed so the smart ones will lead the curve...upward to success. They have to lead the next trend, not follow it.

  • Report this Comment On August 28, 2012, at 7:09 PM, Jurobi wrote:

    Note. I am writing this on a desktop computer.

    My son wanted a new computer for school, to replace the one that was 6 years old. Did he want a laptop, like he got 4 years ago? Nope, he wanted a desktop. His reasoning: A desktop costs less than half as much for the same power, can be upgraded easily, and has better graphic capabilities, storage capacity, and memory. It can also be configured in any way he wants, with any OS he wants, even to the point of being able to dual or triple boot (up to 3 OS's, selectable at will). Try that on an iPad.

  • Report this Comment On August 28, 2012, at 11:24 PM, herky46q wrote:

    It all depends on your needs and preferences. I like how an iPad has replaced my desktop computer. So far, the limitations of a tablet have not been bothersome.

  • Report this Comment On August 29, 2012, at 1:55 AM, geekdadnyc wrote:

    The reason that the Wintel industry's sales have slowed down is simply this -- fewer customers care to upgrade based on Microsoft's latest OS.

    Remember how exciting the release of Windows 95 was? It made a material difference in the computing experience, and millions of consumers bought new computers to run it. And it was worth the hassle and expense of upgrading.

    The last cycle (ignoring Vista) was XP to 7. Everybody had to learn new ways of doing the same thing. Still, the modernization aspect was there, and many people begrudgingly upgraded.

    But now? Microsoft has not made a convincing case that Windows 8 is going to be significantly better than Windows 7. Also, most cool new software for the desktop is web-based, so it's the same on Win 7 and Win 8.

    Plus these same customers (enterprise or consumer) are spending hundreds of dollars a year on smartphone technology. Given the relative states of technology, you're going to get much more bang for your buck by upgrading your smartphone than your desktop.

    Add tablet sales to that and you wonder if anybody's going to upgrade their PC next year.

  • Report this Comment On August 29, 2012, at 3:12 AM, Rujikin wrote:

    The PC is not dying. It is simply diversifying. Also technically even a smartphone/tablet is a PC (Personal Computer). Some people don't need a full computer, they just need basic functionality while others need a full computer.

    Some people DON'T need Desktops because all they do is surf the web, check e-mail, and watch videos online. Those people are probably going to leave Desktops/Laptops for good. Once they all switch this downward trend should stop.

    If you want to do anything with word, powerpoint, excel, programming etc... You need a Desktop/Laptop. If you want a lot of storage space you will have to get a desktop. Most of these people already have desktops so their needs will be pretty much constant.

    Anything with multimedia/video editing need Desktop/Laptops (gaming laptops). They won't change much.

    Most gamers on the PC will never trade in their Desktop/Laptop so their sales won't change much.

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