Analyst who called this year's 10% PC decline thinks 2014 will be much better

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In January 2013, analyst Ben Bajarin of Creative Strategies made a bold call, telling clients that PC units would decline more than 10% this year as many users turned to tablets to replace PCs. He based his prediction on the pessimism component vendors at the end of 2012, and on his belief that Windows 8 would be "sort of a confusion point in the market."

He was right -- PC sales will be down more than 10% in 2013, and tablets have essentially captured the former growth of the PC market, as this chart from Morgan Stanley (via Business Insider) shows.

But Bajarin believes 2014 will be a lot better, and may even see the PC market return to slight growth.

First of all, supply chain sources are "ramping up" production, Bajarin says. "That's the leading indicator toward PCs doing well this quarter. Right now, orders are up into the first half of next year."

But more interesting is what Bajarin thinks is driving this growth. Consumers still need a PC at home for some tasks, like organizing files and connecting all those devices -- tablets and smartphones -- that they've bought over the last few years. A lot of those PCs are more than four years old, and therefore long overdue for replacement.

"We do think the evidence is mounting that the refresh as been delayed as long as it can be," says Bajarin. "At least 50 to 60 million purchases could come in refresh -- so many machines are four years or older."

In fact, he thinks the industry might see a surprising uptick in desktop PCs for consumers, as well as strong sales of "all-in-ones" or portable desktops -- large notebooks that that generally sit in one place in the home, but can be picked up and moved if need be, like the Dell XPS 18. He also thinks that "two-in-ones" that double as a notebook and a PC might find traction next year. 

As consumers buy more expensive computers, this also means that average selling prices will rise, which is good news for PC makers. "You might view it as an investment. You'll buy the best thing -- then not buy another one for a really long time."

On the business side, he thinks Microsoft's end of support for Windows XP in April 2014 won't have much effect, as companies tend to buy new PCs on a predefined cycle, and have already been swapping out older PCs for new ones, then putting Windows 7 on them. 

Whether the PC market returns to growth next year or not, Bajarin cautions that it will only be a bump, not the reversal of a trend.

"This bump will happen, then it'll get ugly again. We tell vendors, understand this as a pendulum swing. Tablets can be refreshed more often, PCs probably won't be. The key is to be ready when refresh cycles happen every four or five years."

Personally, I think that a four-to-five-year refresh cycle in the consumer space is optimistic. Apart from the crummy netbooks that dominated the market three to five years ago -- and which are being replaced mostly by tablets -- desktop PCs and high-end notebooks have actually been pretty good for a long time, and there aren't any hardware-boundary scenarios to compel most consumers to upgrade. For instance, consumers aren't flocking to store huge video files as they did with audio files in the early 2000s as digital music became popular. As more core functions move to tablets -- communications, entertainment, and gaming -- consumers will find themselves visiting their old desktop PCs less frequently than ever, and will only replace them when they literally become unusable. That's more like every seven years. Or every ten years.

That said, I absolutely believe there's a potential market for well-designed two-in-one PCs, and the economy does look like it's picking up, so there may be cause for optimism after all. 

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