For PC market, the numbers don’t compute

Sales plummet even as capacity, reliability rise

Unlike with PCs now, consumers are routinely upgrading to newer, better smartphones, because of the two-year contracts offered by the major phone companies.Getty Images/File

Today’s personal computers are more powerful and capable than ever. And consumers just don’t care.

Sales of new PCs are plummeting, as consumers are finding that tablets and smartphones can perform many of the functions of modern desktop computers, but with more convenience.

With their colorful touchscreens, wireless Internet connections, and powerful processor chips, these mobile devices are more than adequate for reading e-mail messages, visiting websites, or even watching TV shows and movies.

Moreover, unlike with PCs now, consumers are routinely upgrading to newer, better smartphones, because of the two-year contracts offered by the major phone companies.

“I am essentially buying a new computer every 24 months, because I get a new smartphone,” said Howard Anderson, cofounder of the investment firm Battery Ventures and a senior lecturer at the MIT Sloan School of Management in Cambridge.

For consumers who get their devices through their phone contracts, smartphone upgrades cost little or no money up front, making it a much more attractive choice than shelling out $500 or more for a new PC.

While sales of smartphones and tablets are growing at high double-digit rates, PCs sales are declining at an alarming rate. In the first quarter of 2013 sales of personal computers fell by nearly 14 percent, according to IDC Corp. of Framingham, the biggest quarterly drop since the company began keeping track of the market in 1994. Another research firm, Gartner Inc., estimated a smaller but still severe decline of 11.2 percent.

That deepened a trend that has been developing for some time; PC sales in the United States have declined for eight of the past nine quarters; worldwide, PC sales have slumped for four quarters in a row. And it’s not confined to machines running Microsoft Corp.’s dominant Windows operating system.

Plummeting PC sales means big trouble for tech industry giants Hewlett-Packard Co., Dell Inc. , Microsoft Corp., whose Windows operating system is used on most of the world’s personal computers, and Intel Corp., whose microprocessors drive most Windows and Mac computers. Both Microsoft and Intel are releasing quarterly earnings this week.

HP, suffering through massive layoffs, is on its fourth chief executive in three years, and its board chairman recently resigned. In a statement, HP said the company is moving into tablet computing with multiple products for consumers, businesses, and government agencies. “HP is already moving beyond the core PC,” it said.

Meanwhile Dell is the subject of an intense buyout battle, with founder Michael Dell leading a $24 billion offer to take the company private and launch a major overhaul of its business practices to break out of the PC slump.

In response to the recent sales figures, Dell issued a statement conceding that “the demand environment remains challenging,” but noting that the company actually gained market share last year.

Even Apple is feeling the bite. Booming tablet and smartphone sales have eaten into sales of Mac computers, but the company ends up recapturing lost revenues when customers buy its iPads and i­Phones. Apple declined to comment.

Microsoft has received much of the blame lately for the continued slide in PC sales, as its new Windows 8 operating system hasn’t caught on with consumers or corporate buyers. In a recent filing with the US Securities and Exchange Commission, Dell cited the “uncertain adoption of the Windows 8 operating system” as one reason for its current woes.

But Microsoft responded in its own statement, noting that “Windows 8 sold over 60 million licenses in its first few months — a strong start by any measure.”

As for Intel, the company is investing heavily in low-powered chips suitable for tablet computers and smartphones, said John Gallaugher, an associate professor at the Carroll School of Management at Boston College.

But the mobile chip market is full of potent competitors such as Qualcomm Inc. and ARM Holdings, and those low-power mobile chips, Gallaugher said, are also “lower-margin chips.” Meaning even if Intel succeeds, its mobile chips won’t deliver PC-sized profits. Intel declined to comment.

Another, more ironic reason, for the decline in PC sales is the high quality of today’s computers. Most machines made in the past few years can easily perform popular computing tasks, so there’s little reason to upgrade.

“If I don’t have to buy a PC, I won’t spend the money,” said IDC research analyst Rajani Singh. "This is good-enough computing. My current PC is good enough.”

Even so, it’s not like PCs are suddenly going to disappear like typewriters. With their comfortable keyboards, and ample data storage capacity, PCs are better than tablets or phones for tasks that require lots of data input, such as, writing documents. Desktop and laptop computers will sell by the millions for many years to come, but a lot more slowly.

“It’s a replacement market,” said Anderson, who predicted that people will buy new PCs only when they must.