Analysts say PCs are at a tipping point
A prominent analyst at Citigroup has confirmed that intermediate-term prospects for PCs are less than stellar.
"Robbed of catalysts, we see limited likelihood PC-related shares will appreciate meaningfully in coming months, despite valuations," explained Citi analyst Glen Yeung in an industry note obtained by MarketWatch.
"We must recognize the risk/likelihood that PC sales may be at a tipping point, more permanently suffering at the hands of new personal portable connected devices [such as tablets and smartphones]."
According to Yeung, the industry has thus been hopeful about PC unit growth linked to Microsoft's upcoming Windows 8 operating system. Although September production is up 20% from a dismal August, Yeung said it is "increasingly evident" that a rebound "is unlikely."
"After an initial build recovery in September and October, we suspect PC-related builds will again soften from November onward."
Citigroup analyst Walter Pritchard expressed similar sentiments, but seemed to adopt a more optimistic approach to Microsoft's flagship operating system.
"There is a risk that Windows 8 [will be] viewed as a disappointment at launch," he said. "[Nevertheless], as long as we continue to have confidence that touch-based Windows hardware will reaccelerate by mid-2013, we believe Windows 8 will reposition Microsoft's Windows business to better compete in the post-PC world of touch-centric hardware."
Jefferies analyst Ross MacMillan was slightly more pessimistic about the success of Windows 8 - at least in the short term.
"Microsoft is at a critical juncture as it tries to establish renewed relevance in consumer devices, while also transitioning to deliver more cloud services across the portfolio," he opined. "Despite low expectations and an undemanding valuation, we think Windows 8 could underwhelm."