IDC believes that Microsoft (NASDAQ:MSFT) will gain ground in tablets over the next few years as its smartphone efforts stall out. The research firm recently estimated that between 2015 and 2019, Microsoft's share of the tablet market will more than double from 8.5% to 17.8%, but its market share in smartphones will only inch up from 2.2% to 2.3%.
IDC expects Microsoft's growth in tablets to be fueled by Windows 2-in-1 devices, which could appeal to upgrading PC users. Meanwhile, Apple's (NASDAQ:AAPL) iPads and Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android tablets will likely lose market share as users refuse to replace "good enough" devices. But in smartphones, IDC believes that Microsoft's plan to blur the lines between PCs and mobile devices with Windows 10 won't dent the iOS and Android duopoly.
While that reasoning seems sound, investors should remember that IDC's long-term predictions haven't always been exactly spot on before. Let's take a look back at some of IDC's previous market predictions and consider whether investors should have faith in the firm's new forecasts.
Grading IDC's past predictions
Back in 2011, IDC issued a long-term forecast for the smartphone market through 2015. The firm believed that Windows Phone's share would soar from 5.5% to 21%, while BlackBerry's (NYSE:BB) share would only slightly decline from 15% to 14%. In reality, BlackBerry controls less than half a percent of the market today.
IDC expected iPhones to control 15% of the market, which is comparable to its 14% share today. But it also believed that Android, which now controls 83% of the market, would only run on 45% of all phones.
The firm's last five-year forecast put too much faith in Microsoft's and BlackBerry's ability to compete in smartphones. It underestimated Android's ability to expand as a free open-source OS for smaller OEMs, and it didn't realize that Apple and Google had too much of a head start against Microsoft in multitouch smartphones and mobile apps. It also didn't predict that iOS and Android devices would gain new enterprise security features that would marginalize BlackBerry in BYOD work environments.
However, we shouldn't single out IDC for its bad predictions. In 2011, rival Gartner (NYSE:IT) also predicted that Windows Phone and BlackBerry would still be significant smartphone players in 2015. Gartner also predicted that iPads would control 46% of the tablet market by 2015, which is much higher than its current market share of 25%.
Why do research firms keep issuing long-term forecasts?
Research firms like IDC and Gartner make money by selling reports and forecasts to big investors, analysts, and companies. These buyers use the long-term forecasts to map out their investment or business plans.
In the fast-moving tech industry, it can be tough to see even a year ahead. Therefore, IDC's and Gartner's five-year forecasts aren't really intended to provide perfectly accurate views of the future. Instead, they're educated estimates as to how the market will evolve over time, based on current tech trends and business strategies.
To be fair, IDC's and Gartner's quarterly and annual shipments data are reliable and considered the industry standard for measuring growth and market share. IDC also regularly evaluates its previous long-term forecasts with letter grades. For example, it recently gave itself a B+ on the accuracy of its 2015 information and communications technology forecast for Africa. These self-evaluations indicate that IDC's long-term forecasts could improve over time.
Knowing that long-term forecasts can be quite wrong, how much weight should we give IDC's latest look ahead? Let's consider some factors.
Mind these variables
IDC's belief that Microsoft's share of the tablet market could more than double by 2015 is based on the notion that 2-in-1 Windows 10 devices will keep gaining market share as iPad and Android users stop upgrading.
However, the iPad Pro could gain ground in the 2-in-1 market and disrupt Microsoft's growth. Other iPad users could finally upgrade their aging devices, and Apple could gain more ground in businesses through its enterprise partnerships. Google could finally merge Chrome and Android, which would introduce a disruptive new class of 2-in-1 Chromebooks to the low-end market.
As for the smartphone market, I believe that Microsoft's share will decline instead of holding steady. The company faces too much competition from Apple and pricier Android devices in the high-end market, where new flagship devices must gain ground to spread new features like Continuum. In the low-end market, Google's refreshed Android One plan to sell $30 to $50 devices could render cheap Windows Phones obsolete.
The key takeaway
Investors should take research firm estimates with a grain of salt. IDC and Gartner's shipment and market share numbers are reliable, but their five-year forecasts still need some work. Looking ahead, investors should factor in disruptive variables -- like the iPad Pro, 2-in-1 Chromebooks, and Android One devices -- to gain a better overall understanding of the mobile market's future.
Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends Gartner. 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.