Ahead of Windows 10, the PC Is Weaker Than Ever

Microsoft (MSFT 0.37%) Windows 10 comes out this month. It's a pretty big deal for the software giant as it tries to redeem itself from the flop that was Windows 8. But IDC has some bad news for Microsoft and any other companies intimately tied to the PC value chain: The PC market is weaker than ever.

Woe is PC
IDC has released its latest figures on the state of the PC market during the second quarter, and it doesn't look good out there. During the second quarter, a total of 66.1 million units shipped worldwide, which was a bit worse than expected. That sum represents a year-over-year decline of nearly 12%, which is about a percentage point below prior forecasts.

To some extent, the market is facing a tough comparison, since Q2 of 2014 saw relatively stronger shipments thanks to the end of Windows XP support and the subsequent upgrade cycle it triggered. Here are the world's top PC vendors:

Source: IDC.

Of these companies, Apple was the only bright spot, with Mac shipments jumping 16%. All other vendors saw shipments decline. Acer fared the worst, with unit volumes falling 27%.

But Windows 10 isn't likely to spur a hardware upgrade cycle, since there are numerous free upgrade routes to Windows 10. In the near term, PCs with Windows 10 pre-installed won't even be available when the new operating system launches on July 29.

Playing the long game
This is both good news and bad news. The good news is that Microsoft continues to lessen its reliance on new PC sales, making the form factor's ongoing "death" increasingly irrelevant. The bad news is that this ongoing transition for Microsoft represents a fundamental shift in the company's business model, which inevitably entails an incredible amount of risk.

Microsoft has spent the past few years trying to be more like Google, focusing more on services and transitioning its core products to subscription models. Chief Operating Officer Kevin Turner made as much abundantly clear at a tech conference late last year:

The thing about it is, though, we've got to monetize it differently. And there are services involved. There are additional opportunities for us to bring additional services to the product and do it in a creative way. And through the course of the summer and spring we'll be announcing what that business model looks like.

This is no longer about primarily monetizing a user at the point of purchase for a Windows or Office license or a Windows PC. Now it's about figuring out how to monetize a user over the lifetime of using whatever device that person is on, which also includes other platforms. At the time, Turner noted that Office for iPhone had been downloaded 35 million times.

The game is changing, and the PC market's woes don't have to be Microsoft's woes.