The PC Market Stabilizes

Once again we have a report of declining sales of personal computers, and once again some folks are worrying that this might signal the end of the personal computer. While the former is true, the latter certainly is false.

The decline in sales signals not an abandonment of the personal computer, but a change in the technology growth of PCs.

To put it bluntly, PCs have stopped growing.

By "PC" or "personal computer" I refer to desktop and laptop computers that run Windows. Apple products are excluded from this group. I also exclude ChromeBooks, smartphones, and tablets.

Sales of personal computers are declining because demand is declining. Why is demand declining? Let's consider the factors that drive demand:

Growth of the organization When a business grows and increases staff, it needs more PCs.

Replacement of failing equipment Personal computers are cheap enough to replace rather than repair. When a PC fails, the economically sensible thing to do is to replace it.

New features deemed necessary Some changes in technology are considered important enough to warrant the replacement of working equipment. In the past, this has included CD drives, the Windows (or perhaps OS/2) operating system, new versions of Windows, the 80386 and Pentium processors, and VGA monitors (to replace older monitors).

The recent economic recession saw many companies reduce their ranks and only now are they considering new hires. Thus, the growth of organizations has been absent as a driver of PC sales.

The basic PC has remained unchanged for the past several years, with the possible exception of laptops, which have gotten not more powerful but simply thinner and lighter. The PC one buys today is very similar to the PC of a few years ago. More importantly, the PC of today has no new compelling feature - no larger hard drive (well, perhaps larger, but the old one was large enough), no faster processor, no improved video. (Remember, I am excluding Apple products in this analysis. Apple has made significant changes to its hardware.)

The loss of these two drivers of PC sales means that the one factor that forces the sales of PCs is the replacement of failing equipment. Personal computers do fail, but they are, overall, fairly reliable. Thus, replacement of equipment is a weak driver for sales.

In this light, reduced sales is not a surprise.

The more interesting aspect of this analysis is that the technology leaders who introduced changes (Microsoft and Intel) have apparently decided that PCs are now "good enough" and we don't need to step up the hardware. Microsoft is content to sell (or give away) Windows 10 and designed it to run on existing personal computers. Intel designs new processors, but has introduced no new "must have" features. (Or if they have, the marketing of such features has been remarkably quiet.)

Perhaps Microsoft and Intel are responding to their customers. Perhaps the corporate users of computers have decided that PCs are now "good enough", and that PCs have found their proper place in the corporate computing world. That would be consistent with a decline in sales.

I expect the sales of PCs to continue to decline. I also expect corporations to continue to use PCs, albeit in a reduced role. Some applications will move to smart phones and tablets. Other applications will move to virtualized PCs (or virtual desktops). And some applications will remain on old-fashioned desktop (or laptop) personal computers.

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Some have suggested that the decline of PC sales may also be explained, in part, by the rise of Linux. When faced with the prospect of replacing an aged PC (because it is old enough that Windows does not support it), people are installing Linux. Thus, some sales of new PCs are thwarted by open source software.

I'm certain that this is happening, yet I'm also convinced that it happens in very small numbers. I use Linux on old PCs myself. Yet the market share of Linux is in the one- and two-percent range. (For desktop PCs, not servers.) This is too small to account for much of the annual decline in sales.