Microsoft’s decision to offer free upgrades to Windows 10 was terrific news—for users, but not the PC industry.
IDC said Thursday that it expects PC sales to decline further in 2015, by 6.2 percent, versus an actual drop of 2.2 percent in 2014. In part, that’s because the analyst firm doesn’t see a need for users to invest in new PCs to run Windows 10. “[C]hanges like the free upgrade option for consumers and platform integration aren’t expected to drive a surge in new PC shipments,” IDC wrote.
Unfortunately, the only segment that will move quickly on Windows 10 is the segment that won't pay for it, IDC noted. "The consumer transition to Windows 10 should happen quickly, but the free upgrade reduces the need for a new PC." Instead, the firm predicted consumers will buy more mobile devices: "Many consumers will continue to prioritize spending on phones, tablets, and wearable devices like the Apple Watch during the holiday season.”
Not even the business sector is expected to jolt the PC market to life with Windows 10. "The commercial segment is expected to evaluate the OS before deploying it and most new commercial PCs will be replacement systems," the firm said.
In all, IDC said that it expects 289 million PCs will be sold this year, made up of 167.2 million notebooks and 121.8 million desktops. The future's slightly brighter: IDC predicts that 294.1 million PCs will be sold in 2019. That represents a mere 0.4-percent compound annual growth rate—but at least it’s growth.
Why this matters: This isn’t as bad as it seems for PC makers. IDC is technically correct that Windows 10 doesn’t require new hardware. But several new features take advantage of capabilities that new PCs are expected to support, including Windows Hello, a biometric capability that allows Windows 10 to recognize either your face or your fingerprint to log you in. Hardware makers are expected to offer dedicated laptops that include depth cameras that scan your face, much like the Intel RealSense cameras the company has released. Consumers who choose not to upgrade won’t be able to take advantage of some of the new conveniences Windows 10 offers.
Tablets, too, take a dive
IDC also had bad news for the tablet market: Worldwide shipments of tablets and 2-in-1 devices are forecast to reach 221.8 million units in 2015, a decline of 3.8 percent from 2014, IDC wrote. The reason? Phablets. Consumers are simply not inclined to buy a tablet when large-screen smartphones fit the bill. On the flipside, tablets with cellular connectivity built-in are expected to grow slowly to 33 percent of all tablet sales this year, and 40 percent by 2019, according to IDC. Those, presumably, would eat into conventional tablet sales.
Hardware makers are bracing for the storm. Intel, for example, has already said it expects the total PC market to decline in “mid-single digits” throughout 2015—about the 6 percent that IDC predicts. Company executives have said its hardware partners have sold through some of their accumulated inventory in anticipation of a summer launch of Windows 10, further slowing the PC market.
The problem, however, is that the anticipated Windows 10 hardware won’t pick up the slack. During the company’s April earnings call, Intel chief financial officer Stacy Smith said inventories will “simply recover back to a normal level.”
Microsoft probably didn't intend this, but its free Windows 10 upgrade is providing consumer savings far beyond the software itself. The lack of demand will inevitably cause hardware prices to fall further, providing greater savings whenever users decided to upgrade. No one wants hardware makers to go out of business, but you can’t argue with a few more dollars in your pocket, right?
This story, "Sorry, PC vendors: The free Windows 10 upgrade means users won't be buying new PCs" was originally published by PCWorld.