PC Sales Tank. Is Microsoft to Blame?

Microsoft CEO Steve Ballmer, holds a Samsung laptop computer running Windows 8 software during an event at the Churchill Club in Santa Clara, Calif. Photograph by David Paul Morris/Bloomberg

Not a fun day in Redmond, Wash., today.

Expect a few more double whiskeys at the local bars in Microsoft’s hometown as employees of the tech company grapple with the one-two punch that PC sales are cratering and, according to reports, it’s kind of Microsoft’s fault.

According to market researcher IDC, global PC sales in the first quarter dropped 14 percent. The research firm had estimated a drop of 7.7 percent, so that’s … terrible. To add to the industry’s troubles, it’s the fourth quarterly decline in a row and the worst since IDC started tracking the data almost 20 years ago, in 1994.

Not a single region in the world saw growth in PC sales. But what’s got to be eating at Microsoft is that usually the introduction of a new operating system sparks a jump in PC sales, as consumers and  companies upgrade to new machines with the latest OS. This time, after Windows 8 came out last fall, not only did the new software not help PC sales, but some analysts think it may have hurt them.

“At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” said Bob O’Donnell in IDC’s press release. “The radical changes to the [Windows 8] UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices.”


In the face of smartphones and tablets, Microsoft arguably had no choice but to radically redesign its flagship OS. But that seems to have confused some people—not to mention corporate IT managers, who aren’t sitting in their offices asking, “Is there a way I can dramatically increase my workload by introducing a whole new operating system that most employees are going to have trouble with and come to me for help?”

Companies in particular are conservative when it comes to software upgrades, usually preferring the tried-and-true to the new-and-jazzy, but this edition of Windows doesn’t seem to pull them any closer to an upgrade. Indeed, it may push them further away.

Microsoft’s larger problem, at least for the consumer side of its business, is that Windows 8 is not the only challenge the company faces. Windows Phone 8 did see some domestic sales growth recently, from 3 percent of U.S. mobile users in November 2012 to 3.2 percent as of February, according to comScore. That’s a nearly 7 percent growth rate, which is nice, but at the same time Apple had an 11 percent growth rate (off a much larger base). And sales of Microsoft’s Surface tablets, which now come in a business-friendly Pro version, are also estimated to be underwhelming.

To recap: PC sales are in the tank, mobile’s fighting strong headwinds, and Microsoft’s new homegrown tablet isn’t flying off the shelves. That new Xbox better be something amazing.

Before it's here, it's on the Bloomberg Terminal.