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PCs hit by an ugly quarterly drop as Windows 8 flops

First-quarter shipments tumble 14 percent, much worse than expected, says IDC. Gartner, meanwhile, says PCs slid 11 percent, falling below 80 million units for the first time since 2009.

Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Shara Tibken
4 min read
Lenovo is one of the few companies not being crushed by weak PC demand. Josh Miller/CNET
It's really ugly in the PC market right now. How ugly? About the worst it has ever been, according to new reports from a couple of tech research firms.

First-quarter global computer shipments dropped 14 percent from the previous year, said International Data Corp., much worse than its forecast for a 7.7 percent decline. The pullback marked the worst-ever quarter since IDC began tracking quarterly PC shipments in 1994, and it's the fourth consecutive quarter of year-over-year shipment declines.

Rival tech research firm Gartner, meanwhile, said its data showed an 11 percent decline in first-quarter global PC shipments, with the number falling below 80 million units for the first time since the second quarter of 2009.

All regions dropped in the period, despite improving economic conditions in some areas, IDC and Gartner said.

As if that wasn't enough, the main factor expected to boost the PC market -- the release of Microsoft's Windows 8 -- actually hurt computer shipments. And even if people desire PCs with touch screens, they still cost too much and suffer from component shortages. IDC noted that innovations being pushed by PC makers are actually being viewed by consumers as "cumbersome or costly."

Here's what IDC analyst Bob O'Donnell had to say:

While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the [user interface], 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. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.

PC sales have been weak for quite some time, with quarterly results from computer and semiconductor makers reflecting the hard times. The sector is not only being hurt by the weak economy but also by consumers opting for mobile devices instead of traditional PCs. Microsoft's latest OS was expected to boost sales, but it's clearly struggling, as IDC noted.

Shipments fell across all regions, with both the U.S. and the Asia-Pacific region, excluding Japan, down 13 percent from the previous year, according to IDC. Europe, the Middle East, and Africa tumbled in the double digits on a percentage basis, and consumer shipments remain weak in Japan.

It's tough to find many bright spots in the report. IDC analyst David Daoud noted one piece of positive news comes from Asian manufacturers gaining more traction in the U.S. Lenovo, Samsung, and Asus "have bucked the trend" by "identifying the opportunities and weakness of competitors and executing appropriately and intelligently," Daoud told CNET.

HP is counting on devices like its Pavilion TouchSmart 15z Sleekbook to help reverse its fortunes in the computer market. Sarah Tew/CNET
However, the three companies remain relatively minor players in the U.S. market, with only Lenovo cracking the top five. Its shipments in the U.S. jumped about 13 percent in the first quarter, according to IDC and Gartner, but its global shipments were flat. And Gartner noted Lenovo's growth rate was the slowest since the first quarter of 2009, largely because of a shipment decline in the Asia-Pacific region. Lenovo remained No. 2 for global shipments behind Hewlett-Packard, according to IDC. Gartner estimated the two companies were in a "virtual tie" for the title of top PC vendor.

Lenovo said in a statement that while it continues to outperform the traditional PC competition and sees plenty of room to take share, it also is well-positioned in markets outside of traditional computers. That includes smart connected devices such as tablets and smartphones. The company noted it's the No. 3 player in smart connected devices worldwide, according to IDC.

"We have already broadened our focus to this space, and we have the PC+products (such as tablets and smartphones) consumers want," a Lenovo spokesman said. "While our initial success is clearly validating this drive, we are also working hard to improve our performance on this new metric."

For Samsung, part of its success comes from Chromebooks. Such devices, based on Google's Chrome operating system, remain a small part of the market, but they continue to grow each quarter, Daoud said.

Meanwhile, HP, Dell, and Acer again posted steep declines. For HP, its shipments tumbled 24 percent globally and 23 percent in the U.S., according to IDC and Gartner. The latter noted HP's shipment decline was the worst since its acquisition of Compaq in 2003.

Acer, which has been struggling with the demise of the netbook market, posted the sharpest drop, with its worldwide shipments down 31 percent, according to IDC, or 29 percent, according to Gartner.

The numbers from Gartner and IDC typically are similar, but they differed greatly in one regard: Apple. IDC said its shipments slid 7.5 percent as the iPad hurt sales of its computers. But Gartner said Apple's sales rose 7.4 percent.

All in all, PC makers are sure to be taking a close look at their strategies for addressing consumer demand, with no sign the declines will end anytime soon.

"It was a perfect storm," Daoud said. "Really, there's no one single thing we can point to and say is the culprit. It was all over the map."

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Updated at 1:20 p.m. PT with comment from Lenovo and again at 1:50 p.m. with Gartner data.