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Why a slower-than-expected fall in PC shipments helps Microsoft

Puneet Sikka

Why a slower-than-expected fall in PC shipments helps Microsoft (Part 1 of 5)

A slower-than-expected decline in PC shipments

Analysts widely predicted that the PC market would see a rapid decline due to the emergence of smartphones and tablets as the preferred household device. However, the PC market defied this trend. Gartner came out with a report claiming that the PC market declined only 1.7% in Q1 2014 compared to Q1 2013. PC shipments declined from 77.9 million in Q1 2013 to 76.6 million in Q1 2014. Gartner cited the reason for this slow decline to the end of XP support by Microsoft (MSFT).

Lenovo surpassed HP in the PC market

Lenovo experienced the fastest growth in the PC market, at 11%, increasing its market share from 14.9% in Q1 2013 to 16.9% in Q1 2014. HP (HPQ), meanwhile, lost its top position, when its market share could only increase from 15.1% to 16.0% during the same period. Dell (DELL) also increased its market share, from 11.2% to 12.5%, while Acer Group and Asus’ market shares remained in the single digits.

Microsoft will benefit the most from the slower PC market decline

Traditionally, Microsoft has relied most on PC market growth for its own growth. Microsoft is the dominant player in the PC software market through its flagship products, Microsoft Office and Windows. It faces very little competition in the PC operating system market from Apple’s (AAPL) Mac OSX, Google’s (GOOG) Chrome OS, and Linux, and even less so in the productivity software market. So a slower-than-expected PC decline is good news for Microsoft.

The end of Windows XP support is key the reason for slow the PC market decline

According to Mikako Kitagawa, principal analyst at Gartner, “The end of XP support by Microsoft on April 8 has played a role in the easing decline of PC shipments… All regions indicated a positive effect since the end of XP support stimulated the PC refresh of XP systems. Professional desktops, in particular, showed strength in the quarter. Among key countries, Japan was greatly affected by the end of XP support, registering a 35 percent year-over-year increase in PC shipments. The growth was also boosted by sales tax change. We expect the impact of XP migration worldwide to continue throughout 2014.”

Continue to Part 2

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