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PC vendors - Should you stay or should you go now?

By James Henderson | Sept. 20, 2016
If they decide to stay, they need to rapidly decide what changes to make, according to Gartner

Business leaders of PC vendors face a stark choice and must decide between overhauling their businesses or leaving the PC market by 2020.

Damning Gartner analysis predicts that if they decide to stay, they need to rapidly determine what changes to make or what alternatives to adapt in today's over-penetrated PC market.

“The PC business model as we have traditionally known it is broken,” Gartner research vice president, Tracy Tsai, said.

“The top five mobile PC vendors have gained 11 percent market share over the past five years - from 65 percent in 2011 to 76 percent in the first half of 2016; but this has come at the expense of profitable revenue.

“While this does not mean that the PC market is finished, the installed base of PCs will continue to decline over the next five years, with a continuing erosion of PC vendors' revenue and profit.”

According to Tsai, the traditional way of gaining shipment market share by competing on price to stimulate demand “simply won't work” for the PC market over the next five years.

“Today's PC vendors need to adjust to the new realities that are shaping consumption,” Tsai advised.

“Including the fact that PC users are extending PC lifetimes until end of life, business PC applications and storage are moving into the cloud, and are less reliant on PC performance and, crucially, that price and specification are not enough for a user to upgrade a PC - a new and better customer experience is the only true differentiation.”

Consequently, Tsai has identified four alternative strategies that PC vendors can use to adapt to the PC market of the future - based on corporate culture and assets, business operation and technology innovation, and completely revamping the business.

Alternative 1 - Current Products and Current Business Model

As explained by Tsai, this alternative is the most conservative approach, with the vendor running a current business operation and selling a current PC product.

It requires high volumes to generate enough cash flow to cover the cost of business, so, in a declining market, consolidation of vendors is inevitable. The purpose here is to protect and keep the PC business running, but the risks are high, especially given Intel's and Microsoft's alternative focus moving forward.

“PC vendors need to streamline operations, shift their focus away from gaining share, and increase the sales proportion of midtier and high-end products to improve operating profits for long-term business sustainability,” Tsai said.

“Another key factor that needs to change is the sales compensation scheme. PC vendors need incentives to drive their internal sales teams and channel partners to move away from a focus on volume and market share to margins and profitability.

 

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