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Computer makers (and Microsoft) are in much bigger trouble than they (and we) realise

Having had the (mis)fortune of helping someone shop for a new laptop this holiday, I’m not surprised that worldwide sales have cratered.

Laptops (and desktops) are still sold by their “specs”. You’ll find yourself in a ridiculously poorly stocked store staffed by salespeople who can rattle off Ghz numbers and hard drive sizes like they’re reciting the alphabet. And the average consumer is petrified by this experience.

Give them the choice, and they’ll keep an ancient PC running Windows XP because they don’t want to learn something new. Or endure the experience of actually buying a new PC.

They’ll end up with something unnecessarily complex and costly (and they know it). Retailers (and the salespeople) shilling this stuff worldwide couldn’t really be bothered. As long as they keep shifting more boxes.

Until the market notices. And by then it’s almost too late.

Worldwide PC sales fell off a cliff in 2013. Sales were down 10% versus the year before, according to both Gartner and IDC. Now, 10% doesn’t seem that big a drop. But, consider that things weren’t even this bad during the global recession in 2008 and 2009 which followed the financial crisis.

In the consumer segment, the numbers are significantly worse. All indications are that sales declined 15% in the year (the enterprise market ‘held up’ with ‘only’ a five percent decline).

The litany of reasons for the decline is trotted out with some regularity: Increasingly capable (/powerful) smartphones mean people are spending more time on their mobiles. Tablets — an entire category that barely existed before the iPad’s debut in 2010. Plus laptops and desktops last longer these days.

There are two big elephants in the room.

The available notebook/desktop options in the market. And Windows 8.

After considering dozens and dozens of options at more than one store, I couldn’t even recommend three options with a clear conscience. Everything’s a compromise. This port of this model, but not on this one. No accessories in stock. And then there’s the retailer happily ranging entire discontinued ranges of laptops (at least the salesperson was honest).

And consumers don’t understand specs. They know that bigger numbers are better, but they don’t actually know why. And (because today’s average computer/laptop buyer bought PCs through the nineties) they’re absolutely petrified of “running out of memory”. But they can’t tell you whether that’s the processor speed, the amount RAM or the hard disk size.

But despite all of this, that’s the way they’re sold dammit! Ask about how the weight of two laptops compares and you’re met with a blank stare (despite this entire category of machines being designed for a single purpose: portability).

And it’s not just a lack of compelling hardware. Consumers don’t like Windows 8. It’s completely upended a paradigm that was familiar to them. They don’t understand the need for two completely different modes (tiles (nee “Metro”) and classic) and the constant, unpredictable hopping between the two that smacks of total compromise. They don’t understand being able to touch the screen for some things but not others.

This is very bad for Microsoft, which as Ben Thompson points out, only makes money in the consumer space when people buy new PCs. And he hits the nail on the head: “instead of alleviating the problems facing PCs — no reason to buy — Windows 8′s increased complexity added a reason not to buy”.

Microsoft is stuck. It’s already rushed a Windows 8.1 revision (codename Blue) into the market. The release itself is significant, coming exactly a year after the launch of Windows 8. Microsoft has never before shipped a significant update on an annual cycle. Crucially, the update provides settings that make it “more like Windows 7”. The criticism and confusion caused by the shock of Windows 8 forced Microsoft’s hand.

Reports over this weekend suggest that Microsoft will unveil its next major Windows release (Threshold) at its Build developer conference in April. But, instead of it being released under the “Windows 8” name, Microsoft is reportedly planning to brand it as Windows 9. Paul Thurrott, who first broke the news, sums it up:

“Windows 8.1, which is a substantial and free upgrade with major improvements over the original release, is in use on less than 25-million PCs at the moment. That’s a disaster, and Threshold needs to strike a better balance between meeting the needs of over a billion traditional PC users while enticing users to adopt this new Windows on new types of personal computing devices. In short, it needs to be everything that Windows 8 is not.”

“…The most interesting thing about Threshold is how it recasts Windows 8 as the next Vista.”

Did anyone at Microsoft see the writing on the wall?

Perhaps they did in late 2012 (that would explain the firing of Windows President Steve Sinofsky)? But was that too late?

There’s some good (less bad) news for Microsoft. Sales to the enterprise are faring better. The lead times for hardware orders are longer. And Microsoft has a resilient business model in its enterprise licensing where corporates essentially “rent” Windows (and its other software) on an ongoing basis. But all this will do is help mask the pain in the short-term. It doesn’t reverse the fundamental change happening in the overall market.

Wonder why Microsoft’s CFO Peter Klein resigned at the start of last year?

I’m not even going to mention the bizarre ousting of Steve Ballmer.

IDC sees the global PC market contracting a further 3.8% in 2014. Would it be foolish to think that number will end up closer to five percent? Peak PC?

Image: Bigstock

Author | Hilton Tarrant: Columnist

Hilton Tarrant: Columnist
Hilton Tarrant is production editor at Moneyweb. His main focus is project management for the listed company’s local and international websites, and contributes to their strategic direction. From time-to-time, he also fills in for Alec Hogg on the SAfm Market Update with Moneyweb radio programme. In between, he covers... More
  • Xand Venturas

    I feel like Windows 8 was a knee-jerk reaction to the iPad’s incursion into PC sales. Microsoft tried to do in one update what Apple has been doing over their lats three OS X/iOS updates, which is bring the mobile and desktop experience closer together. Apple’s policy of phasing in the changes of UX and UI have, obviously judging by Mac and iOS sales, been recieved rather well, while Microsoft’s attempt to bridge the gap in one fell swoop has backfired. The UX and Ui are too different and too intimidating to the average user, while Mac has remained relatively consistent with design tweaks here and there. I changed to Mac five years ago and have never once been tempted to go back to PC. It pains me to have to use a PC at work every day. Anyway, great column, and a great reflection of the terrible consumer experience that exists in this country. To be fair, the service and knowledge in an iStore isn’t much better than in Incredible Connection or Dion Wired.

  • mattblackZA

    As a long time Mac user (I haven’t owned a PC since Windows 95), I will come out and say that I don’t mind Windows 8. Something about Metro that makes sense to me.

    As for devices, I think:
    Entry users: Buy the cheapest system you can. No ones gran needs a R30k laptop>
    Middle weight: You’re screwed. Choose the one you like the most.
    Heavy users: Buy the most expensive machine with the biggest hard drive you can possibly find.

  • mattblackZA

    I prefer Incredible Connection and Dion Wired. At least they can pretend to be clueless because there are so many different brands and products in the store. At the iStore the kids mooch around and have no clue about any of their 5 products.
    Also, iStore employees (Looking at you Clearwater store) insist on playing Los Angeles gangsta rap at full blast off the iDock stations. Its a HATEFUL experience. Thankfully one can buy components off the Internet

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