EDITORIAL

Fear And Loathing In The PC Market

Most startups target iOS and Android. The two mobile platforms are for many companies the only platforms. At the same time, the PC market remains quite large. Should companies looking for increased app distribution target PCs? It depends on potential reach.

To understand where things stand, Mattermark took a quick tour through recent market data to understand where PCs are today, and where they are going this year. 

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The numbers are out and the PC market looks weak. But not every figure is precisely what it appears to be. Let’s take a look.

Here’s the raw data concerning the fourth quarter PC market from IDC and Gartner:

  • Gartner: Fourth quarter PC shipments fell 8.3 percent to 75.7 million units, compared to the year-ago period.
  • IDC: Fourth quarter PC shipments fell 10.6 percent to 71.9 million units, compared to the year-ago period.

The gist is simple: PC sales continue to slide, even as Microsoft works to improve the market through its Windows 10 push and computer manufacturers strive to bolster their hardware offerings.

Component to this particular mix is the 300 million PC-per-year threshold. The PC market was over that line for some time, but has now fallen below the benchmark for the first in more than a half decade. Keep in mind that 300 million PCs sold per year works out to an average of 75 million per quarter. That’s precisely 25 million per month, or north of 800,000 each day — not a low pace to be sure, but not Android either.

Here’s IDC on the matter: “Although total shipments were in line with already conservative expectations, the news nonetheless ended 2015 as the first year below 300 million units since 2008.” Whatever firewall the 300 million mark might have represented is now a thing of the past.

Summing the full year’s IDC data, 277.5 million PCs shipped in 2015. That’s 7.5 percent off the 300 million unit mark.

How Do You Count?

Long-time watchers of the PC market know that the two main monitoring groups do not always agree on what constitutes a PC. That’s fine, but it is important to understand what we are considering.

Focusing on IDC, which provided the more bearish number, is useful as it helps us better understand how to measure the PC market. IDC does not count what it calls ‘detachable tablets’ in its PC statistics. Here are the words from its report: “Detachable tablets, which are counted separately from PCs, are growing quickly but from a small base.”

It’s not hard to grow when you lean on the inverse of the Law of Large Numbers. 

So, a bit of potential good news didn’t count in its estimate of 71.9 million units moved during the fourth quarter. That in and of itself doesn’t matter too much. It is more than fair to define what constitutes a PC however you wish. Here’s what follows in the IDC note concerning the growing popularity of ‘detachable tablets’ in the fourth quarter, and the full year itself:

Adding [detachable tablet] units to PC shipments would boost growth by roughly 6 percentage points in the fourth quarter and 3 percentage points for all of 2015, bringing year-on-year growth for 4Q15 to a decline of about -5% and -7.5% for all of 2015. The impact for 2016 will be larger as detachable tablet volume grows, boosting earlier forecasts of PC growth in 2016 from -3.1% to growth of 1 to 2%.

In normal English, IDC is saying that if you counted ‘detachable tablets’ in its fourth quarter, and full year metrics, growth would have been less negative during the measured periods. And, looking ahead, that negative unit growth should cease. However, keep in mind that even with modest growth during 2016, the 300 million unit threshold remains likely out of reach for at least a few years.

We can parse that in two directions. You may say that it’s an obvious negative to the PC market that this new category — that some don’t even count as fully constituent to the PC universe — is doing well, while traditional PCs are not. Or, you could argue that PCs continue to evolve and that the market appears prepared to reach its bottom this year, preceding an incredibly modest recovery.

Either argument can be made in good faith. Regardless, the change from a 10.6 percent decline to a 5 percent decline is material. That’s millions and millions of devices. So, if we decide to constrain the PC market to traditional formats we run the risk of discounting spend that might have gone to a traditional PC before the advent of this particular form factor.

As such, caveats are king.

Changes

The question is simple: Can ‘detachable tablets’ in fact spur PC shipments — using the term PC loosely, of course — and stabilize the larger PC market? A year ago, I would have laughed at the question, but it now seems far more plausible.

If ‘detachable tablets’ can finally hit pause on the implosion of the PC industry, it would mark a critical moment in the history of PCs, especially in the context of the smartphone era.

Summing to our original question, it seems that the PC is neither dead, nor growing at the moment. If ‘detachable tablets’ can spur unit volume growth, the shift would underscore efforts by Microsoft and other players in the space to drive momentum. For startups, that could mean more eyeballs, and more clicks if they also target PCs.

Regardless of currently murky data, it seems clear that current and expected PC volumes over the next several years will provide a userbase of sufficient size for startups to target that should not decline precipitously. Companies that focus only on mobile-first platforms could miss out.

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Featured Image via Flickr user Flavio~ under CC BY 2.0. Image has been cropped.
© Mattermark 2017. Sources: Mattermark Research, Crunchbase, AngelList.
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