Why are PC sales continuing to fall? Preliminary Q1 2016 results emerge

Worldwide PC shipments totalled 64.8 million units in the first quarter of 2016, a 9.6 per cent decline from the first quarter of 2015, according to preliminary results by Gartner. But why are they falling?

This drop was the sixth consecutive quarter of PC shipment declines, and the first time since 2007 that shipment volume fell below 65 million units.

Once again, Gartner says the drop is due to exchange rates, inventory build up and waning interest from customers. 

However, Gartner did add that consumer demand is ‘remaining stable’ in the UK.

"The deterioration of local currencies against the US dollar continued to play a major role in PC shipment declines. Our early results also show there was an inventory build up from holiday sales in the fourth quarter of 2015," said Mikako Kitagawa, principal analyst at Gartner.

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Kitagawa added: "All major regions showed year-over-year shipment declines, with Latin America showing the steepest drop, where PC shipments declined 32.4 per cent. The Latin American PC market was intensely impacted by Brazil, where the problematic economy and political instability adversely affected the market.

"The ongoing decline in US PC shipments showed that the installed base is still shrinking, a factor that played across developed economies. Low oil prices drove economic contraction in Latin America and Russia, changing them from drivers of growth to market laggards."

In EMEA, PC shipments reached 19.5 million units in the first quarter of 2016, a decline of 10 per cent year over year. In Western Europe, consumer demand remained stable in Germany and the UK, while in France, the PC segment was impacted by the transition to high-definition TV.

Consumers preferred to buy new TVs or a specific box for the TV reception. In the business segment, large organisations are testing and evaluating Windows 10, and major deployment will start at the end of 2016.

However, PCs are not being adopted in new households globally as they were in the past, especially in emerging markets. In these markets, smartphones are the priority.

Meanwhile, IDC said that worldwide PC shipments totaled 60.6 million units in the first quarter of 2016, a year-on-year decline of 11.5 per cent.

IDC anticipated a ‘relatively weak’ environment during the first half of 2016 as Windows 10 enterprise upgrades largely remained in pilot phase, while consumer demand remained weak. The volatility in stocks, commodities and currencies also helped depress shipments.

EMEA PC shipments declined double-digit year over year, reported IDC. Q1 2016 was the last quarter to suffer from an unfavorable comparison due to large Bing shipments in the prior year, which IDC said ‘significantly affected’ the consumer market.

"Windows 10 had a limited impact on PC renewals as its rapid adoption came mostly from free software upgrades," added IDC in a statement. "The new products launched with Windows 10 and Skylake architecture supported sales growth but could not reverse the overall negative trend."

In the business segment, Gartner analysts said the Windows 10 refresh is expected to start toward the end of 2016.

In terms of vendor performance, Lenovo maintained the number one position in worldwide PC shipments in the first quarter of 2016 despite a 7.2 per cent decline in shipments.

Preliminary worldwide PC vendor unit shipment estimates for Q1 2016 (thousands of units)

In the US, PC shipments totalled 13.1 million units in the first quarter of 2016, a 6.6 per cent decline from the first quarter of 2015. US PC shipment volume was the lowest in three years.

"Vendors that had a strong consumer focus struggled to increase sell in shipments," Kitagawa added.

"There was no particular motivation for US consumers to purchase PCs in the first quarter of 2016. There have been increased sales of two-in-one PCs, but not enough to offset the decline in desktop and traditional notebook sales."

In the US, Dell surpassed HP Inc to become the number one vendor based on shipments. Dell’s PC shipments grew 3.1 per cent in the US, while HP Inc.’s shipments declined 17.3 per cent.

‘Dell benefited from focusing on the business segment instead of the consumer market,’ Gartner explained.

Image source: Shutterstock (chart of business declining)

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