Gartner updated its PC shipment forecast today. There is no better way of describing the new estimate than calling it catastrophic for the PC industry.
Gartner expects just 3.8 percent growth for 2011, which is down from 10.5 percent last spring, down from 15.9 percent in November 2010 and down from 18.1 percent in early 2010. If that trend continues, the PC industry should consider itself lucky if there is any growth at all this year – especially if we remember that Gartner overestimated every single PC shipment forecast in 2010 and was even 0.5 points off from the actual result at the end of November 2010 (a 14.3 percent forecast versus a 13.8 percent actual 2010 result that was published in early 2011).
You may question the value of the word "forecast." If Gartner's original January 2010 forecast of 445 million units for 2011 has shrunk by a staggering 93 million units, or a stunning 26 percent to only 352 million, you can only hope that the reasonable mind has learned that a business shouldn’t be built on any IT forecast that predicts a scenario that extends further than three months. I will leave that topic for another article and will focus instead on some explanations about why the PC industry is virtually going down in flames. Some may argue that this is an exaggeration, as PC makers are still selling gazillions of PCs, but let's agree that the PC market has been stuck in a ditch for a while.
Gartner's press release blames the downturn, in part, on growing economic concerns and the fact that consumers aren't willing to spend money as readily as they did prior to the current recession. The other part is based on an argument that we have been hearing for some time: changing user behavior, lacking a compelling argument to buy a PC, and a trend that people aren't replacing their PC as frequently as they were. Let's just call this problem by its name: iPad.
Think about this for a moment: Can the iPad really be blamed for the current issues in the PC industry? Sure, it's a big hit and it controls the mindshare and excitement in computing these days, but does Apple really have the power to bring an entire industry down to its knees? I doubt it. The iPad has not killed PC growth by itself. My claim: The (off-the-shelf) PC has become incredibly boring. Look at the PC lineup in your local Best Buy or Walmart and I rest my case. There is absolutely no innovation left in the common PC that would convince you to go out today and buy a new one – a PC that would easily convince you to wait in line, spend $1,000 or so, and then hurry home to try it out.
While there are PC manufacturers that complain about low margins and others that simply try to get rid of an amazing business (HP, anyone?), there is Apple, which is outgrowing the PC market quarter after quarter with a tight and attractive product line. Apple isn't just growing because it is Apple and because it understands product marketing better than any other IT company on this planet. Apple is outgrowing the market because it is able to design and build desirable PCs for relatively affordable prices. The closest PC manufacturer that has approached Apple's model was VoodooPC when it was integrated into HP. Unfortunately, HP strangled it for reasons I don't quite understand.
Looking back at the history of the PC, I would argue that the PC has not changed much in 30 years. The usage model today is the same as it was with the IBM PC 5150 in 1981. The notebook today may look different, have prettier colors and come in a thin form factor, but the idea is the same as it was with the first true notebook, the Compaq LTE from 1984 or the first sub-notebook, the Apple Powerbook 100 from 1989. In notebooks, for example, there's still the LCD screen, there's still a keyboard, and the screen on the keyboard is still folded to pack it up. Apple is quite obviously thinking about the form factor, and it is Apple that is leading trends such as the Macbook Air or even the iPad, which could be viewed as a radical redesign of the compact notebook. The last innovation from PC manufacturers I can remember was the netbook, which was essentially killed by lack of innovation. What we see lately is a trend that is established by Apple and an entire industry that is frantically trying to copy Apple, whether that is the Macbook Air (Ultrabook), the smartphone or the tablet. This may sound harsh, but I don't believe that the PC industry can return to its former glory when it is following Apple.
You may not have guessed it, but I am actually very passionate about the PC industry and its accomplishments over the past three decades. The better half of the day I spend talking to hardware and software makers, and I find it somewhat surprising that there is the general idea that there really is no iPad problem and no economy problem. It seems that many share the view that the problem is innovation and a lack thereof. What would it take for you to wait in line for a PC? What are the characteristics of a device that you find truly desirable in a PC? How important is the CPU, the GPU and the hard drive? How important are usage models and how important is the evolution of the keyboard, for example? Are these (example) questions we should ask before we paint last year's PC in a new color this year? Probably.
I don't believe that the iPad is the cause of squashing growth in the PC market, other than the fact that it is a fresh way to interact with a computing device. Just like Apple, PC manufacturers will have to innovate to be successful. If Gartner's latest forecast doesn't communicate that there is a need for innovation, then I don't know what does.