Consolidation in struggling PC market considered 'inevitable' as sales plummet

Maynard Um with Wells Fargo believes the latest PC sales data from IDC, released this week, is the strongest indication yet that the PC market is in line for a major shakeup over the next few years. He sees an industry with more share consolidated among even fewer competitors.

The latest data from IDC showed that PC sales declined 13.9 percent year over year in the first quarter of 2013. That marks the worst year-over-year slip on record.

Apple saw its domestic sales slide 7.5 percent in the three-month span, according to IDC, suggesting that the Mac platform is in stronger shape than the overall PC market, though still also on the decline. However, IDC's data does not include international sales, which Um believes are likely growing faster than the U.S.

"While unit decline reflects Apple is not immune from the slowdown, it, unlike its peers, is at least participating in the tablet market," he said. "While new entrants offering low priced tablets are causing some share shifts, we believe Apple will continue to dominate dollar profit share — more than half of the industry profits despite 10 percent share."

Outside of Apple, Um expects to see a "markedly different" PC landscape in a few years, with fewer companies controlling larger shares. But in the interim, with no signs of immediate consolidation or industry rebound, Um believes the PC market will "continue to feel pain."

For the industry to reverse its downward trend, the analyst believes two major shifts need to happen. First, tablets will need to reach a level of market saturation, thus allowing consumer dollars to shift back to traditional PC purchases.

Secondly, Um believes pricing on PCs will need to become "materially more attractive" for the new touchscreen and ultrathin devices that debuted late last year along Microsoft's new Windows 8 operating system. At the moment, he believes these design shakeups are just too expensive for the average consumer.

The big winner in the March quarter, according to Um, was Dell, which gained 100 basis points of market share sequentially from the holiday quarter. He believes the company's gains may have been a result of its focus on retaining strategic share, which could have affected its pricing and margins.

The continued struggles seen in the PC market were predicted by late Apple co-founder Steve Jobs in 2010, when he said the debut of the iPad signaled the beginning of a market-wide transition to a post-PC era. At the time Jobs believed that traditional PCs would remain, but their presence would be diminished over time as fewer users would need their specific abilities.

"The transformation of the PC to new form factors like the tablet is going to make some people uneasy because the PC has taken us a long ways," Jobs said at the AllThingsD conference. "The PC is brilliant… and we like to talk about the post-PC era, but it's uncomfortable."