Business upgrades represent a bright spot for slumping PC sales

Continued decline expected in Q4

It seems like 'tis the season for everyone but the manufacturers of personal computers. According to the latest predictions from International Data Corporation, PC sales will continue to decline during the last quarter of the year.

IDC forecasts that PC shipments will decline by as much as 10% in the fourth quarter. This means that the market could shrink by as much as 10.3% for 2015, and IDC predicts that demand for PC will remain soft in early 2016. However, the PC market is expected to show signs of rebound in late 2016, as businesses begin to replace their systems.

"Once commercial adoption of Windows 10 accelerates, and in combination with upgrades to steadily aging consumer PCs, we expect demand for new PCs to improve for several years as replacements will also be boosted by the end of support for Window 7, just as the end of support for Windows XP boosted shipments in 2014," IDC said in a statement.

Weak demands in 2015

Several factors were cited for the weak demand for PCs this year, including "the strong dollar, depressed commodity prices and existing inventory." Manufacturers have approached the market differently. HP spun off its PC business from its enterprise business, and several Japanese PC manufacturers are rumored to merge their operations.

Even though there are competing computing form factors, such as smartphones and tablets, IDC is still bullish on the traditional PC.

"Very few people are giving up on their PC – they are just making it last longer," said Loren Loverde, Vice President, Worldwide Tracker Forecasting and PC research at IDC.

With softening consumer demand for PCs, IDC expects that manufacturers will turn to the business and education markets for growth. Gartner previously predicted that the PC market will grow in 2015 with business upgrades, but it looks like that forecast was overly bullish.

"Beyond a slow but steady churn in the installed base, Windows 10 could reach enterprises faster than previous releases driving some commercial PC refreshes in the mid-term," said Linn Huang, Research Director, Devices & Displays at IDC. "Additionally, the US K-12 market continues to gain momentum as vendors increasingly focus their Chromebook strategies there."

Windows 10

Surprisingly, Windows 10 may also be a contributing factor to weak demand. Because Microsoft offers Windows 10 as a free upgrade to existing users, consumers may be delaying the purchase of a new PC, Loverde said.

But because Windows 10 comes with better support for new form factors, like two-in-one convertibles, shipments of hybrids are expected to grow in the future. This will cannibalize the traditional PC form factor, but the overall effect will be positive for PC-makers.

"As a reference, combining detachable tablets with PCs would boost growth by roughly 3 percentage points – this would result in a trend of declining volume from 2012 to 2015, followed by about 1% growth in 2016 and slightly higher gains in subsequent years," IDC said in its report.

Convertibles are also expected to cannibalize sales of traditional tablets.