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NPD and Morgan Stanley Research are reporting that notebook PC sales growth (monthly year over year) has been in decline since Apple’s iPad was released and now has gone negative. There are undoubtedly a number of factors at work, but the iPad is surely a major one. Best Buy CEO Brian Dunn “said internal estimates showed that the iPad had cannibalized sales from laptop PCs by as much as 50 percent.”
While this is certainly hard cheese for the PC makers, there is someone else who is taking it on the chin: Microsoft. Almost all of those laptops PCs that didn’t move were running the Windows operating system and many would pick up some version of Microsoft Office as well. Those sales have now vanished and when the Microsoft Windows and Office cash cows stumble, so does Microsoft. Stand by for some interesting earnings reports from Redmond.
Update: There’s a lot of skepticism about Best Buy CEO Brian Dunn’s statement and he’s now backpedaling rapidly without denying he said it. I tend to think it was simply a misstatement since the implied hit on notebooks sales is so much larger than the Morgan Stanley report would require. Speaking of which, a comment from the author of the Morgan Stanley article says that the sales figures showing the decline include netbooks. That is better news for traditional PC makers, but since most netbooks these days run Windows, it is cold comfort for Microsoft.
Last Friday, Joe Wilcox raised the thorny question of whether the iPad is really a PC. It is thorny not just in terms of philosophical and taxonomic abstractions, but in terms of counting by major PC market researchers, Gartner and IDC.
According to Apple’s fiscal third calendar-quarter earnings announcement, 3.472 million Macs shipped during calendar Q2. Apple also shipped 3.27 million iPads. If iPad counts as a PC and the numbers are combined, then Apple shipped 6.742 million personal computers during second quarter. That’s high enough to raise Apple to No. 5 in global PC shipments.
Complete US information is not available, but Wilcox’s analysis shows that adding iPads to the PC total could well put Apple in 3rd place behind market leaders HP and Dell and perhaps higher in Q2. As for Q3:
But what about third quarter? Could Apple top Dell or HP? The answer would depend on how iPad is classified. Is it a PC? If, yes, then based on analysts projections for PCs, Macs and iPads, Apple almost certainly could sell more units than HP or Dell in the United States. I’ve seen Wall Street analysts’ iPad shipment estimates range from about 4 million to over 5 million units. Macs: Hovering above 3 million units. Assuming even half the combined Macs and iPads were sold here, Apple would be in striking distance of topping either HP or Dell.
All of this is more important than bragging rights, of course. The real question is what the iPad surge is doing to the bottom line of the Windows PC hardware makers and to Microsoft’s cash cows of Windows and Office. There may be plenty of room for all with the iPad style tablets creating a wholly new market, but how many iPads are purchased in lieu of a PC or an additional PC? I add that last caveat because the iPad currently has a strong functional dependence on another PC running iTunes so I find it hard to imagine an iPad-only user. Still, grabbing the second PC market has got to hit the Windows PC food chain. Once again, I have to observe that this market could have been Microsoft’s – now we get to see what penalty they will pay for missing it.
I see that Mary Jo Foley has confessed to buying an iPad and I have to confess that I bought one too. Like Mary Jo, it is my first Apple product ever, and like Mary Jo, so far I love it. Or more accurately, I love it when I can get it away from the rest of the family who love it too. Just a few observations, many of which echo Mary Jo’s:
If I had to sum it up, the iPad is an incredible amount of fun. There may be a business use in there somewhere but I am not looking for it.
I do wonder how Microsoft missed this market. This is what Microsoft’s Origami (aka UMPC) should have been but wasn’t, perhaps because it came down from the PC world instead of up from smartphones. As Mary Jo observes, Microsoft is apparently going to try again with Windows 7 or Windows Embedded "slates", and we’ll have to see if they can break their persistent run of problems in the "gadget space," but a company that not long ago had such a large chunk of the smartphone market should have seen this coming, particularly since they did not have any partners in this market to slow them down.
Microsoft today unveiled Windows Phone 7 (formerly Windows Mobile 7) and while it is chockfull of new goodies to keep them in the race with Apple’s iPhone and Google Android, do not expect to see any phones using Windows Phone 7 until the holiday shopping season:
Today at Mobile World Congress 2010, Microsoft Corp. CEO Steve Ballmer unveiled the next generation of Windows Phones, Windows Phone 7 Series. With this new platform, Microsoft offers a fresh approach to phone software, distinguished by smart design and truly integrated experiences that bring to the surface the content people care about from the Web and applications. For the first time ever, Microsoft will bring together Xbox LIVE games and the Zune music and video experience on a mobile phone, exclusively on Windows Phone 7 Series. Partners have already started building phones; customers will be able to purchase the first phones in stores by holiday 2010.
Some of the new features:
Windows Phone 7 Series includes six hubs built on specific themes reflecting activities that matter most to people:
People. This hub delivers an engaging social experience by bringing together relevant content based on the person, including his or her live feeds from social networks and photos. It also provides a central place from which to post updates to Facebook and Windows Live in one step.
Pictures. This hub makes it easy to share pictures and video to a social network in one step. Windows Phone 7 Series also brings together a user’s photos by integrating with the Web and PC, making the phone the ideal place to view a person’s entire picture and video collection.
Games. This hub delivers the first and only official Xbox LIVE experience on a phone, including Xbox LIVE games, Spotlight feed and the ability to see a gamer’s avatar, Achievements and gamer profile. With more than 23 million active members around the world, Xbox LIVE unlocks a world of friends, games and entertainment on Xbox 360, and now also on Windows Phone 7 Series.
Music + Video. This hub creates an incredible media experience that brings the best of Zune, including content from a user’s PC, online music services and even a built-in FM radio into one simple place that is all about music and video. Users can turn their media experience into a social one with Zune Social on a PC and share their media recommendations with like-minded music lovers. The playback experience is rich and easy to navigate, and immerses the listener in the content.
Marketplace. This hub allows the user to easily discover and load the phone with certified applications and games.
Office. This hub brings the familiar experience of the world’s leading productivity software to the Windows Phone. With access to Office, OneNote and SharePoint Workspace all in one place, users can easily read, edit and share documents. With the additional power of Outlook Mobile, users stay productive and up to date while on the go.
And the vendors on board:
Partners from around the world have committed to include Windows Phone 7 Series in their portfolio plans. They include mobile operators AT&T, Deutsche Telekom AG, Orange, SFR, Sprint, Telecom Italia, Telefónica, Telstra, T-Mobile USA, Verizon Wireless and Vodafone, and manufacturers Dell, Garmin-Asus, HTC Corp., HP, LG, Samsung, Sony Ericsson, Toshiba and Qualcomm Inc. The first phones will be available by holiday 2010. Customers who would like to receive additional information about Windows Phone 7 Series and be notified when it is available can register at http://www.windowsphone7series.com.
So will it be enough to get Microsoft back in the smartphone game? That’s the rub and it is a bit hard to say since the only available demo devices are pre-production, development-only handsets. One key point is that "manufacturers will not be able to make massive modifications to Windows Phone" or to the fairly rigorous hardware specifications which sounds more than a bit like Windows with all its good and bad aspects for the end-user and the OEMs. At this point all I can say is that Windows Phone 7 seems quite ambitious, but it is certainly late.
