Framingham (MA) – In its latest edition of the Worldwide Quarterly PC Tracker report, IDC projects the rate of growth of the global PC market, combining commercial and consumer sectors, will be 10.5% in 2006, down 0.1% from IDC projections made last November. But contrary to reports that somehow echoed throughout financial markets today, as the director and co-author of the report, Loren Loverde, told TG Daily this afternoon, that slight downtick was not on account of Microsoft’s delay of Windows Vista for consumers until January 2007. In fact, said Loverde, IDC had been working with these exact same numbers last week during its preparation for the report’s release, prior to Microsoft’s announcement.
“These numbers were actually produced before the announcement,” Loverde told TG Daily, “and we don’t think we’re significantly adjusting them based on the announcement.”
Loverde, who co-authored the report with IDC’s Richard Shim, said he believed the impact of the Vista delay on PC sales may perhaps be measurable, come the end of Q1 2007, but will not impact the mature PC market enough to materially impact its existing growth pattern. He reminded us that the adjustment for 2006 represents a downtick in the rate of sales growth, not the rate of sales itself. Furthermore, IDC improved its projection for global sales in combined sectors for the whole of 2007, from its November 2005 projection of 8.9% to 10.7%, with a total sales volume for that year adjusted to $232 billion.
“The commercial market is essentially not going to be affected” by the Vista delay, Loverde told us, reminding us that this sector constitutes about 62.5% of total PC sales worldwide. “They’re on a much longer adoption phase, and they’re going to do much more testing. So basically a month or two is not going to make a huge difference for them.”
Whether IDC’s projections can be truly interpreted as good news for Microsoft depends on whether you tend to see the glass as half-full…especially when it’s not quite half-full. Loverde surprised us by saying that he believes few businesses would be convinced to make the shift to Vista PCs, whether it was made available in September or November (for volume licensees) or the following year. The reason is because the move to Vista constitutes an infrastructural shift, which businesses don’t do haphazardly…and some businesses just don’t do, period.
“For a large IT organization,” remarked Loverde, “they’re going to have other applications, they’re going to have an installed base of PCs that needs to be supported, they’re going to want a common platform. It’s not like they’re going out on Day One saying, “Okay, let’s start with all new Vista PCs.” They have to migrate their whole infrastructure, and before they do that, they’re going to want to test it and evaluate it. So from a commercial perspective, I think there’s very little impact from a small delay.”
While Vista will indeed be at least one of the catalysts for PC hardware evolution that Microsoft has hoped and touted that it would be, it won’t be the principal factor in the evolution of the market, Loverde explained, in terms of sales numbers or sales volume. There are bigger economic factors at play here, especially over the course of the past five years, within which the little melodrama that is the Vista delay is a small thunderstorm. “This trend is playing itself out on the background of other economic and technology trends,” said Loverde. There had been consistent sales growth in the PC market up until about 2000, he said, after which, a “perfect storm” started to brew. The Y2K scare started, followed by 9/11, triggering negative growth in 2001. The dot-com bubble collapsed soon afterward, followed by the launch of wars in Afghanistan and Iraq.”
A perfect storm like that mandates a kind of perfect recovery, which Loverde believes we had. Sustained positive growth helped the global economy out of its general malaise. And now that the emergence is complete, he illustrated, growth is returning to its regularly scheduled program. It’s this leveling off which is a greater factor, Loverde believes, than the Vista delay in determining the future pattern of the PC economy.
“I think that Microsoft understands that this is a long-term platform,” IDC’s Loverde remarked, “and the success of Vista is not going to be determined by a single quarter’s production.” Other analysts’ comments in the press, including in TG Daily, predicting a virtual end to PC sales in 2006, are too reactionary, failing to take the bigger picture into account. “If you look at the seasonality of the year in the consumer segment,” he said, “the fourth quarter is the largest segment, for business as well as for consumer. But it’s not 90% of sales with 10% in the other three quarters. It’s about 30% of the year, and if you look at how much that has varied over recent years, it doesn’t vary a lot.
“We’re not in a situation where PCs don’t exist, and all of a sudden, a brand new product is going to hit the market, and it’s the favorite toy for that Christmas season, and the buzz is going to wear off,” Loverde continued. “This is a mature industry, where users [with] existing products have a pretty good base of technology, and a pretty good understanding of what’s out there. They’re going to buy to replace an existing system. Sure, they want new features and security and other things, and Microsoft would like for there to be people banging down the door, waiting to get it the day it’s out. Maybe there will be. But if we’re looking at worldwide shipments of over 200 million a year, and we’re just not going to get that much of a buildup right at the release of Vista, in terms of total market impact.”
While Vista may be the platform for growth in PC functionality going forward into the next decade, Loverde believes, perhaps no new operating system will have as material an impact on the growth pattern of PCs as did Windows 95. The growth of the PC, both as a unit and as a market, may not be synchronized with the operating system any more, he added, citing the continued development of processors from Intel and AMD, that may continue unabated. “In early years of the PC market, a new OS like Windows 95, brought about significant changes to the OS that were critical for users at the time,” he explained. “Now, I don’t think we should diminish the advantages of Vista, because it will certainly bring advantages, but I think they’re part of a more continuous technology evolution, and less of a leapfrog from one phase to another.”