Bad News for Windows: IT Is Spending on Cloud, Not PCs

U.S. PC sales are down compared to a year ago, as enterprises put dollars toward cloud and virtualization technologies over PCs and consumers turn to smartphones and tablets and shun netbooks.

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Research firm IDC has tallied up PC sales for the second quarter of 2011, and the news is not good for Windows.

Although worldwide PC shipments increased 2.6 percent from Q2 2010, that number is short of IDC's projections for 2.9 percent growth, with the main culprits being competition from smartphones and tablet PCs, a dwindling netbook market in the U.S. and "pressure from lackluster economic conditions."

Within enterprises, a shift in spending to cloud and virtualization technologies has also softened PC demand, according to the IDC PC sales report.

The United States was one of the weaker regions in IDC's report. Second-quarter PC sales in the U.S. were down 4.2 percent over the same period last year, according to IDC.

Another factor at play for the lackluster PC sales: The drunken-sailor-type spending on PCs in the second quarter of 2010, which raised the bar for this year, says IDC research analyst Rajani Singh, in a news release.

"The impact of 2Q10's difficult-to-sustain 12 percent growth" has led to continued contraction this quarter, Singh said.

IDC reported last month that PC shipments are expected to grow by 4.2 percent in 2011, down from its February forecast of a 7.1 percent market increase. But the PC slide will not last forever, IDC notes, as it expects the market to rebound in 2012 and show a 10 percent to 11 percent growth through 2015. (Still, even 11 percent is a far cry from the 19 percent PC growth that took place from 2005 to 2007).

On the enterprise side, PC demand has weakened this year as big businesses reallocated their budgets. New PCs are no longer the priority at enterprises as IT departments plan for and dedicate money to cloud service migrations, according to IDC.

"Corporate buyers continue to focus on increasing share of their IT budget in new IT solutions such as cloud and virtualization," says Singh.

Also affecting commercial PC sales: PC refresh cycles are winding down. Enterprises are in the middle of PC refresh cycles and SMBs are at the peak of their refresh cycles, according to Mikako Kitagawa, principal analyst at Gartner Research, which also released a report on PC sales this week.

There was some additional discouraging data for Microsoft in the IDC report. A breakdown of vendor market share in the U.S. shows that year-over-year Mac sales are through the roof, growing 14.7 percent, while all PC vendors tracked by IDC lost share — except Toshiba, which grew by 3.7 percent.

Check out the table below for a breakdown of market share numbers.

Top 5 Vendors, United States PC Shipments, 2Q 2011

Rank Vendor 2Q11 Shipments Market Share 2Q10 Shipments Market Share 2Q11/2Q10 Growth
1 HP 4,692 26.3% 4,721 25.3% -0.6%
2 Dell 3,959 22.2% 4,408 23.7% -10.2%
3 Apple 1,917 10.7% 1,671 9.0% 14.7%
4 Toshiba 1,617 9.1% 1,560 8.4% 3.7%
5 Acer 1,513 8.5% 2,028 10.9% -25.4%
Others 4,159 23.3% 4,243 22.8% -2.0%
All Vendors 17,857 100.0% 18,632 100.0% -4.2%
Source: IDC

Shane O'Neill covers Microsoft, Windows, Operating Systems, Productivity Apps and Online Services for CIO.com. Follow Shane on Twitter @smoneill. Follow everything from CIO.com on Twitter @CIOonline and on Facebook. Email Shane at soneill@cio.com

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