Microsoft's (NASDAQ:MSFT) chances of shining when it steps up with its latest quarterly report next week continue to diminish.
PC sales had a horrible holiday season. Industry tracker Gartner is reporting a 5% drop in worldwide PC shipments during the final quarter of 2012.
This doesn't come as a surprise anymore. Fellow PC watcher IDC's check last week showed an even larger 6.4% drop in global PC shipments during the same three months.
This is naturally terrible news for Microsoft. The arrival of Windows 8 in late October was supposed to be the catalyst to breathe new life into languishing sales of desktops and laptops. When PC sales were running sluggish earlier in 2012, some apologists theorized that PC makers were simply clearing inventory ahead of the Windows 8 push. Well, it's time for a new theory that centers around Windows no longer being the operating system of choice.
Smartphone and tablet sales continue to climb at the PC industry's expense, tapping Apple's iOS and Google's Android as the new tastemakers of tech. Who needs a clunky PC when the Internet and the computer can fit in your pocket? Sure, there's some heavy-duty computing and gaming that needs Windows, but that's becoming a shrinking portion of the tech-savvy population.
Adding insult to injury, Microsoft's bold bet on mattering in tablets isn't starting to scratch the Surface.
UBS analyst Brent Thill became the latest Wall Street pro to hose down his sales projections for Microsoft's Surface tablet. He now sees Microsoft moving a disappointing 1 million Surface tablets during the holiday quarter, half as much as Thill was originally targeting.
To put things in perspective, Apple sells roughly a million iPads a week! Amazon.com sold "millions" of Kindle Fire tablets during the 2011 holiday season without the ad blitz that Mr. Softy paid up for this time around.
How can the world's largest software company hold up so poorly? The functional shortcomings of the Surface may be corrected in this month's Surface Pro rollout, but the high price points when perfectly capable Kindle Fire and Android gadgets fetch less than $200 will limit its appeal to a niche audience.
Thill is weighing the sluggish Surface sales and shrinking PC presence in shaving his profit target. He now sees Microsoft reporting quarterly earnings of $0.76 a share, in line with the year-over-year decline that analysts are now forecasting.
As long as Microsoft has money, it will never be short of chances or potential catalysts. Mr. Softy isn't going away. However, seeing the stock trading at pocket change away from yet another 52-week low, it's also easy to argue that Mr. Softy isn't going anywhere else either.
Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.