Don’t write off the PC just yet
There’s a glimmer of good news in the battered market for personal computers: The PC isn’t dead yet. Of course, the overall personal computer industry is never going to rebound. PCs are still useful to many, but they’re not the centre of digital life anymore and users replace them infrequently.
Still, more than $174 billion of PC hardware was sold last year, which is a big pool of money to chase even if PCs are a declining business. PCs with high-end features and price tags to match have held up better than the overall PC market this year. Sales of computers priced $1,000 and more will inch up 1.5% this year, research firm IDC estimates. That growth rate isn’t much, but it is impressive considering that unit sales of Apple Inc.’s Mac computers—a big chunk of the high-priced PC market—declined 10% in the year ended September.
Catering to the high end has been a windfall for both Microsoft and Apple. Microsoft generated more than $4.1 billion in revenue in the past fiscal year from its Surface line-up. That is new revenue for the software giant, which started its own line of PCs in 2012. And although Mac sales have declined in the past year, Macs still generated $22.8 billion in revenue in the past 12 months.
The even bigger PC success story can be found at the low end of the market. IDC estimates unit sales of PCs priced below $300—including Alphabet Inc.’s stripped down Chromebook laptops—will increase 7% this year. PC makers also figured out how to manage their business in a declining market. HP stopped trying to sell every PC it could and focused on machines it can sell profitably. As a result, HP’s operating margin in the PC business was 4.3% or better in each of the past two quarters—the company’s best operating margin in four years. Pretax margins for Lenovo’s PC business have also inched up this year, to 5.2%.
Don’t call this a PC comeback. But the signs of life at the top and bottom of the market are good for Intel, Microsoft, PC hardware makers and companies that make PC hard drives such as Western Digital Corp. And Seagate Technology. Personal computers may not matter as much as they used to. But they still matter, and money remains to be made for companies that play smart in an eroding industry.