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Analysts, PC industry cool on Windows 8

By Peter Svensson

AP Technology Writer

LAST UPDATED: 08:25 a.m. HST, Oct 18, 2012

NEW YORK » While Microsoft is touting next week's launch of Windows 8 as the savior of the computer industry, PC makers and analysts are increasingly skeptical that the new operating system will lure consumers away from tablets and smartphones.

Even Intel Corp., which makes the processors at the heart of 80 percent of personal computers, doubts that Windows 8 will have a big impact on sales. CEO Paul Otellini said this week that he's "very excited" about the new operating system but expects the usual holiday bounce in PC sales to be half of what it usually is. Otellini suggested that PC makers are being cautious about building big stocks of Windows 8 PCs.

"We haven't had a chance to really judge how consumers will embrace this in the PC space or not," Otellini said on a conference call with reporters and analysts.

Research firm IHS iSuppli expects the industry to ship 349 million PCs this year, down 1 percent from last year's all-time high. Although small, the decline would be the first since 2001.

In the U.S., a mature market where consumers are gobbling up tablets, PC sales have already been declining for two years.

Meanwhile, Apple has been doubling sales of iPad tablets every year since the first model was introduced in 2010. In the April to June period, Apple shipped 17 million iPads, while Hewlett-Packard Co., then the world's largest maker of PCs, shipped 13.6 million PCs, according to Gartner analysts.

Smartphones, which were a niche market before the 2007 launch of the iPhone, outsold PCs last year, even though PC sales were at a record high. Some 488 million smartphones were sold in 2011, according to research firm Canalys.

The PC market is still big, Microsoft CEO Steve Ballmer told the Seattle Times last month, "and Windows 8 will propel that volume."

Windows 8 is a response to the popularity of tablets. It tosses out many Windows conventions in favor of a radical new look that's designed to be easy to use on a touch screen. With Windows 8, PC makers are releasing a slew of laptops that double as tablets, either with detachable screens or with screens that fold down over the keyboard.

But Citigroup analyst Joe Yoo is even more pessimistic than Intel that Windows 8 will spur a turnaround in sales of desktop and laptop computers. It could turn out to be a "non-event" in terms of getting people to buy PCs, he said.

Microsoft did not immediately respond to a request for comment. On Thursday, the company reports results for the quarter that ended in September, and executives will likely talk about prospects for the rest of the year.

Brian White at Topeka Capital Markets said Taiwanese PC component suppliers aren't seeing any pickup in orders ahead of the Oct. 26 launch of Windows 8.

"The sentiment around Windows 8 was overwhelmingly negative," he said after meetings with suppliers. "We believe the PC industry is headed for a muted December quarter and well below the ramp expected with new products."

Analyst Mary Jo Foley at UBS is "leery" of Windows 8, noting that it has an entirely new look and feel. It could either be a big success, she said, or it could confuse customers and turn them off. She noted that Microsoft is set to support the launch with its $1 billion in advertising, the most it has ever spent on a campaign. That support will be critical for overcoming resistance to the new user interface and reinvigorate interest in PCs, she wrote.

PC makers began the year with the hope that a new wave of lightweight laptops called ultrabooks would provide a sales lift. But ultrabooks are still expensive, with most models around $1,000, and they haven't been compelling enough to overcome the growing popularity of smartphones and tablets.

Now, PC makers are in a tough spot when it comes to taking advantage of Windows 8, said Patrick Moorhead, a former chip executive who now runs research firm Moor Insight. Adding a touchscreen into a PC is expensive, and they're competing with tablets that are much cheaper. Meanwhile, Microsoft hasn't made much effort to add new features for mouse-and-keyboard PCs to Windows 8.

"If you're a user, you're asking yourself: 'Why do I need to buy this new notebook, if my old notebook can still do what I need it to do? Instead, I'll buy a new phone or a tablet,'" Moorhead said.

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XML808 wrote:
Poor Microsoft. Still building a new saddle for the horse that is headed for the glue factory.
on October 18,2012 | 08:03AM
control wrote:
Sad that the article didn't clue into the fact that PCs are now primarily sold to and used by businesses. Virtually all tablets target the consumer info-tainment crowd. Neither android or apple have serious apps that businesses need and use on a daily basis. Overall, the PC computer market has reached a level of maturity and saturation which microsoft and tech writers has yet to understand. BTW, mainframes are making a come back due to the expense and difficulty in managing and securing distributed server systems.
on October 18,2012 | 08:29AM
allie wrote:
on October 18,2012 | 11:04AM
jaluasa wrote:
Try doing data analysis involving large spread sheets on a tablet.....
on October 18,2012 | 09:30AM
allie wrote:
No real productivity breakthroughs in high tech will spell lower GDP growth for the USA in the coming years. Years of high growth are over. Nothing to do with Obama or Romney
on October 18,2012 | 11:04AM
EyeKea wrote:
If coming up with cool, forward thinking wasn't a problem for Microsoft, execution and marketing is. What sets Apple apart from MS is not just product development, but marketing and execution of production and distribution. Apple is a master at these things, MS is still, well, trying. Windows 8 COULD be a great product and the idea behind it makes sense; a product to bridge the gap between computers and tablets. The problem is, in the corporate field, you have users that are so used to the current windows interface, they are proficient with it in getting the job done. Unless MS offers a legacy UI to allow these users to continue using their computers without the down time to learn the new system, they will be faced with heavy resistance. The younger users and people who are already used to using tablets should not have a problem navigating the new UI, but even this group of users will experience some learning curve. The UI is vastly different from anything else out on the market so unless there are compelling reasons for them to buy windows 8, they will just stay with what they are familiar with already.
on October 18,2012 | 12:48PM
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