Did Microsoft Really Kill the PC?

There's an awful lot of finger-pointing directed at Microsoft (NASDAQ: MSFT  ) , blaming the Redmond-based software giant for the mess that the entire PC industry is in. With PC shipments on track to be down about 10% this year, it's certainly prudent to try to figure out just what happened.

Most people blame the rise of tablets for the decline in PC sales. After all, before the iPad, people would buy multiple PCs. Today, those dollars are being spent on other devices, including tablets. But others claim that it's Microsoft's fault because Windows 8/8.1 weren't all that great. So, what's really going on here?

Apple is doing better, but with caveats
Apple's (NASDAQ: AAPL  ) sales are a good first place to look to determine if Microsoft is really the problem. MacOS is well-liked and it's not a converged tablet/PC OS like Windows 8.1, which some claim is what throws off potential PC buyers. However, even the mighty Apple saw its Mac sales decline from 4.9 million units in the year-ago period to 4.6 million units -- a 6% decline. Note that this is actually a less drastic decline than the general PC market. But also keep in mind that Macs are strictly high-end systems, and as a result, are less vulnerable to tablet cannibalization than Windows PCs.

The ASUS T100 sold really well
One argument against the fact that Windows 8.1 "killed" the PC is just how well the ASUS Transformer Book T100 is selling. This is a hybrid that runs Windows 8.1 and is powered by a low-power Intel (NASDAQ: INTC  ) Atom processor. During the Black Friday time frame, this device was routinely at the top of the best-seller charts on Amazon.com. Even today, with supplies scarce and prices up, the device is still the No. 2 best seller on the site in its category. Clearly, Windows 8.1 isn't a problem for the people clamoring to buy this machine.

It's probably tablets and a lack of compelling low-cost PCs
It seems likely that the decline in the PC market has much more to do with tablets being a much more attractive as incremental computing devices than most laptops. However, as the ASUS T100 showed, a convertible at a low price --  less than $399 -- is a great seller. Could it be that PCs will be attractive again once the flurry of low-cost, long-battery-life PCs based on Intel's low-power Atom-based chips hit the market in force? Could the convertible Windows machines eventually end up being smash hits all around and win back share from pure tablet platforms like Android and iOS?

The ASUS T100's popularity is certainly a great data-point, although it really remains to be seen how 2014 will go, when a new wave of low-cost PCs will be rolled out. There's no denying that the iPad and other Android tablets have taken the place of many low-end PCs as incremental devices. While Windows convertibles could certainly gain back some of that share, there are still plenty of users that prefer iOS and/or Android, which means that wallet share is permanently gone.

Foolish bottom line
Did Microsoft kill the PC with Windows 8.1? It doesn't seem like it. Macs are losing ground too, albeit in a less pronounced fashion, since they are high-end devices and less susceptible to tablet cannibalization. What's going on here is a fundamental broadening of the computing landscape into new form factors. For some uses, tablets are simply better, and many people were buying PCs for uses that tablets are better suited to tackle. This is OK for Microsoft, since it now has a presence in tablets. It's OK for Intel, since it, too, has a presence in tablets -- and not just Microsoft ones, either.

The PC isn't dead, but it's time to accept that the "PC" now comes in a new form factor with new operating system flavors. Companies that understand and embrace this will do well and companies that try to resist this will fail. It's just going to be a rough transition for both Microsoft and Intel, since there's more competition in these new form factors than ever before.

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Comments from our Foolish Readers

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 December 16, 2013, at 12:50 PM, Wingsy wrote:

    It says something when you parade the ASUS Transformer as the number one seller on Amazon, when the customer rating of this thing is 3.5 stars out of 5. That's a grade of 70, a C-. If that's the tablet that's taking away sales from Windows, it says even more about what people think of Windows nowadays. From this, it does seem like MS really is Windows' problem.

  • Report this Comment On December 16, 2013, at 3:02 PM, emilykulish wrote:

    I don't agree with Wingsy. When people buy an iPad, they don't expect it to be a MacBook replacement. So they don't complain that it cannot replace MacBook.

    However, when people buy a Windows 8 tablet, some of them do expect it to be a laptop replacement. Then you will have some people unhappy because Win8.1 tablets are often under-powered compared with regular laptops. To me, the fact that it can act as a laptop is a huge plus.

  • Report this Comment On December 16, 2013, at 6:16 PM, CuttingEdge wrote:

    I believe there's another factor that I almost never see mentioned in articles describing the decline of PC sales - the life of a PC is much longer than it used to be. For 15+ years, PC performance was increasing drastically and newer software just ran better on the latest PC. However, both the software and hardware industries have moved to parallelization. Windows 7 also brought big power and performance improvements while keeping the same system requirements. We no longer need to replace a PC every 2-3 years - a 5-7 year old PC is completely acceptable and runs just fine. If anything, Windows 8 raises that bar even further - the system requirements are the same as Windows 7, but it's even better on performance and power consumption.

    I truly believe that's a big part of the reason for slower adoption of Windows 8 - many PC users only upgrade when they purchase a new PC and their Windows 7 PCs are still working great. Why upgrade if it still works and it's not slow?

    What if Microsoft (and Intel) DID hurt PC sales, but not in the way we think? Maybe they just finally produced a product that works well enough that users don't feel they need to upgrade as often as they did in the past. That also lends support to the growth of tablets - it's easier to justify a tablet purchase when your PC is still running great.

  • Report this Comment On December 16, 2013, at 6:42 PM, TMFAeassa wrote:

    Thank you all for the great discussion. Please keep it coming!

    -AE

  • Report this Comment On December 16, 2013, at 6:51 PM, symbolset wrote:

    Let's be realistic: nobody uses any features of Windows or Office more recent than XP/Office 2003. What are the system requirements for that?

    0.233 GHz single-core CPU,

    0.166 GB RAM,

    0.400 GB storage,

    800x600 256 color graphics,

    Network of some sort.

    In short to do all your "PC stuff" what you really need is a $50 chinese tablet. In fact, that's overkill for this problem.

    So why does W7/W8/Office 2013 require so much more? Because Microsoft needed to consume the excess capacity that Intel and others created so as to create a market for new equipment. As soon as somebody figured out that all this wasn't really required, the end of the PC was writ in stone.

    Progress killed the PC market.

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