With Tablets and Smartphones Eating the PC, What Can Microsoft Do?

Publisher�s Outlook

With Tablets and Smartphones Eating the PC, What Can Microsoft Do?

By Rich Tehrani, CEO, Group Editor-in-Chief, TMC  |  June 10, 2013

These are very dark days for people who work for many divisions of Microsoft as tablets and smartphones have absolutely decimated the PC market.

According to IDC, PC sales are in a tailspin with 76.3 million units sold in the first quarter of 2013. This number represents a decline of 13.9 percent compared to the forecast decline of 7.7 percent. These are the worst numbers since IDC started tracking in 1994, and it is the fourth quarter of year-on-year shipment declines.

Acer, Apple, Dell HP, and Toshiba (News - Alert) all saw their PC sales decline while Lenovo grew 10 percent in the U.S. but remained flat worldwide. ASUS saw some growth in the U.S. and substantial declines elsewhere.

What this tells us is we are indeed in a post-PC era and as smartphones become more usable and tablets approximate the functions of a PC, consumers are not upgrading their old computers as quickly or buying new ones at all.

This news comes on the heels of the Windows 8 launch, the new OS that fuses the best of the tablet and Windows experience in one platform. The only problem is the new OS with all its marketing and slick new form factors isn’t cutting it, as consumers gravitate toward smaller screen devices.

Expect many calls for Steve Ballmer (News - Alert) to be fired. When you consider how many markets Redmond has squandered since 2000 you could make a solid case for pushing him out. Tablets, music, cloud and smartphones are just a few.

It’s worth noting that Samsung (News - Alert) has been one of the few companies besides Apple to capitalize on tablets and smartphones. Meanwhile, others, such as such as HTC, Nokia and RIM/BlackBerry, which enjoyed leadership positions in this space are also struggling.

Redmond will definitely see sales from corporate customers that upgrade PCs from XP and other operating systems to Windows 8 and of course its developer, server and Exchange lines of business are in no jeopardy at the moment.

Still, you have to wonder why the company isn’t leading the market in app sales on Android (News - Alert) and iOS. It is common knowledge that users want Office on their iPads for example. What is the delay? The latest rumors say the market needs to wait a full 18 months from now to see its debut! The company makes games as well, so why not try to dominate mobile devices with game development?

The additional challenge here is Microsoft already tried to fight Apple with the unveiling of Windows 8, and it seems this isn’t a successful strategy. In fact, this polarizing OS seems to be pushing people to tablets and smartphones.This strategic shift in the market requires Microsoft to refocus like it did when it missed the Internet in the nineties – but this time, Google (News - Alert) and Apple have precious few vulnerabilities to go after.

When Borland owned the desktop database market and could charge $650 for its Paradox software some decades ago, Microsoft stunned the world by rolling out its Access competitor for only $99. When Netscape owned the desktop browser market and charged for its software, Microsoft rolled out Internet Explorer for free.

This time, pricing isn’t going to help the world’s still-dominant OS provider attract massive amounts of new customers. Innovation is about the only thing left to try, and Microsoft is losing the innovation battle to Android and iOS. The scary thing is Adobe Flash for the moment is still a major reason to use PC products, but once HTML5 gets established, PC sales could slow even more.

Microsoft needs to do something to change this momentum, and it needs to do it fast. Not only are its customers signaling discontent, but financial analysts and investors are joining in.

Edited by Stefania Viscusi