Do Weak PC Sales Now Mean Better Ones Later?

Microsoft (NASDAQ: MSFT) management says that PC sales may have fallen slightly in the fourth quarter of last year. The Thailand floods that interrupted supply chains are to blame. What Microsoft did not say is whether pent-up demand will offset the drop as 2012 wears on. That is, logically, what should happen.

Tami Reller, chief financial officer of Microsoft’s Windows unit, predicted that figures will show PC sales fell 1% or more last quarter, according to a Bloomberg report. Disk drive parts made in Thailand were in short supply. Smartphone sales also may have undermined demand.

The economy is good enough, and the number of new PC products is large enough, that when manufacturing returns to normal levels, there should be a large uptick in sales. At least there should be one in the short term.

The usual cycle of PC replacement among consumers and companies will be one reason for robust sales as the year goes on. Products reach the market with new software and faster chips. Competition among the largest manufacturers keeps prices low. Entirely new segments of the market, in the current case tablets, drive customer sales. And there are the introductions of unexpected products like the new ultrabooks, which are light but have powerful processors.

It is convenient to say that smartphone adoption will hurt PC sales substantially. That may be true, but it also may not be. The PC can still do many things smartphones cannot because of their processors, screen size and storage capacity. Consumers and business users often have both PCs and smartphones. None of the large research firms, such as IDC, have changed their overall global 2012 forecasts since the Thailand floods.

PC sales may have been partially interrupted recently, but when that interruption has ended, demand will push sales higher.

Douglas A. McIntyre