[opendtv] Re: EE Times: PC Sales Plummet in Q3
- From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Sat, 10 Oct 2015 09:05:06 -0400
Regards
Craig
On Oct 9, 2015, at 7:30 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx>
wrote:
The title is somewhat "click bait." The analysis here makes sense to me,
especially wrt the effect of the free Windows 10 upgrade (which does not
require more CPU or RAM than Windows 7 or Windows 8), and wrt peaking of
tablet sales (probably at least as much caused by the larger smartphones as
by two-in-ones).
Click Bait?
This is a trend that is far more real than cord cutting. It has been going on
for years - it was especially troublesome between 2011 and 2013, perhaps
because of the high growth levels for tablets over those years. The steep
decline this quarter was not predicted, but along with Windows 10, currency
issues and an overall weak global economy were contributing factors.
But the real issue is that Moore's Law finally pushed us to the point where all
computing platforms are now more dependent on software innovation than
increases in processing power. We now expect these devices - with the possible
exception of smart phones - to have a useful life of five years or more.
Economics is also a significant issue. The average age of light vehicles on the
road in the U.S. Is now 11.5 years, rising from 8.4 years in 1995. Some of this
can be attributed to improvements in product quality in recent decades, but the
main culprit is economics, and it is a factor in declines across many
industries including PCs and the MVPDs.
The big loser in the decline of PCs is the desktop. Mobility has caused a shift
from desktop to laptop, and in many cases a tablet is sufficient for most
tasks.
Desktop PCs will not disappear. Steve Jobs rightly called them "trucks." For
some productivity tasks, a PC is the right tool. But for the average consumer,
the desktop PC is no longer the tool of choice. Laptops and tablets typically
make more sense.
What is growing in importance is the ecosystems around the devices. For more
than a decade, the Windows PC ecosystem dominated. Phones were dumb, and
tablets/PDAs were crude and isolated from the PC ecosystem.
Today we expect our personal data and actions to follow us across multiple
devices. E-mail, browsing history, schedules and appointments, photos, and many
other aspects of our digital lives now track seamlessly within our ecosystem of
choice.
Perhaps that's an exaggeration. Some ecosystems have fared better than others.
Microsoft has failed miserably in the mobile device area, and is struggling to
catch up. Blackberry was a shooting star that burned out.
Android has largely replaced Windows in the lower tiers of the market as the
mass market ecosystem of choice, with Chromebooks and Android smart phones.
Apple has taken the high ground, focusing on the premium tiers with high
quality hardware and the leading ecosystem. As a result they have enjoyed
growth in every device segment, and dominate each segment in terms of
profitability. The Mac is still only 7.5% of PC sales, when tablets are
excluded, but Apple's share of PC sales and unit shipments have been growing
even as the bottom has fallen out for Windows PCs. And last year they banked
nearly 50% of PC industry profits on only 6% of unit sales.
The numbers from IDC and Gartner don't agree for the recent quarter - they
never do, because they include different devices as PCs. One says Mac shipments
grew slightly while the other says there was a slight decline - the real
numbers will be available in a few weeks when Apple reports its fiscal 4th
quarter results.
Both Gartner and IDC are optimistic about the future of the PC industry. They
have little choice, as they built businesses tracking the Windows PC ecosystem.
But their forecasts have missed the mark badly in recent years, as they have
become industry cheerleaders rather than accurately analyzing and predicting
the trends.
The other victim in this is Intel. Even with help from Apple, their core PC
processor business has been declining with the industry. And they too largely
missed the shift to mobility.
Intel has been trying to play catch-up too, subsidizing the cost of Atom
processors for Android tablets. These subsidies have been a factor in the
recent YoY sales declines for iPads - Intel's mobile division lost $4.2 billion
in 2014.
https://gigaom.com/2015/01/16/intel-keeps-throwing-billions-down-the-drain-at-tablets-phones/
Yes, Intel met its goal to have its chips in 40 million tablets last year,
for example — it actually powered 46 million, according to the company — but
it didn’t make any money on them. Purely from a financial perspective, Intel
might be better off ignoring tablets and smartphones: The company’s mobile
division posted a $4.2 billion operating loss in 2014.
All of this brings into question how long companies can continue to lose money
trying to win market share, or trying to prop up declining businesses. In the
first quarter of this year Apple earned 92% of the profits from smartphones
with Samsung second with 15%. Yes, that's 107%, which means just about everyone
else was losing money selling smartphones.
These kinds of economic disparities are important to monitor in any industry,
including the TV industry that we follow here on OpenDTV. While it is
newsworthy to look at the impact that the Internet is having on the content and
distribution congloms, they still control the lion's share of profits, while
the upstarts like Netflix and Amazon are "investing" in this space.
Netflix reported $26.3 million in net profits on $1.64 billion in revenues for
the quarter ended June 2015 - a profit margin of 1.6%. Meanwhile, Disney
reported $2.483 billion in net profits on $13.1 billion in revenues for the
same quarter - a profit margin of 18.9%.
Trends are important. But profits are what really matters in the long term.
Regards
Craig
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