Intel and AMD both
forecast that processor sales will be down for the quarter. Netbook
manufacturers have been reducing orders, and AMD mentioned lack of
notebook demand in North America and Western Europe.
PC sales will fall this quarter, and Microsoft will be selling
Windows 7 to a smaller market.
Last quarter, Apple sold 3.27 million iPads and 3.47 million Macs
for 8.0% of the combined market (see Did Apple Just Double Its
Market Share?). That was up from 3.5% in the March quarter.
This quarter, over 4 million Macs looks likely, if the recent
year-on-year increases keep up, as well as 5 to 6 million iPads. This
will take Apple's share to over 10% of the PC/tablet.
The Impact on Microsoft
In the holiday quarter, Windows market share will fall again as iPad
production ramps up and Android tablets start selling. By this time
next year, Microsoft's share of the PC/tablet market could well be
under 80%. Losing 15% to 20% in 12 months - after Microsoft reaped the
benefits of having better than 96% market share for so many years -
should make heads roll.
The iPhone has already forced out the CEOs of Nokia and LG
Electronics. Their companies failed to respond to the iPhone fast
enough and have lost share in smartphones. Yet Microsoft, with its OS
second only to Nokia in smartphones when the iPhone launched, has
fallen to irrelevance behind Nokia, RIM, Android and iOS (see The Microsoft Model Isn't
Working for Smartphones).
Microsoft's slow response to the iPhone and iPad were a factor in HP
buying the barely alive Palm to obtain its WebOS,
and it probably cost Robbie Bach, then President of the Entertainment
& Devices Division at Microsoft, his job. While sacrificing a
lieutenant or two is reasonable for losing control of Microsoft's
largest customer (HP) and its share of the mobile phone market, rapidly
losing control of one of Microsoft's largest markets after Bill
Gates recognised tablets as the future years ago will cost
Microsoft CEO Steve Ballmer his job.
The Impact of the Economy
In times like these, when the economy isn't booming, people and
businesses will hang on to their PCs for as long as is practical. That
means continuing to use hardware they already have and software they
are already familiar with. When the time comes to change, if iPad looks
to be easier to use and reliable, with cheap, good software and it
costs the same kind of money as a Windows PC or tablet, how many will
choose Windows?
Microsoft always hoped that Windows 7 would be so attractive that it
would clear up the Vista hangover, drive users to upgrade from XP, and
stop bleeding customers to the Mac. The huge problem is that the Mac is
a very attractive platform for Windows 7 users too, and if you want an
attractive, well specified PC with good customer support, the price is
competitive. So the bleeding is getting worse and many of those who
move find they no longer need Windows.
Little Differentiation Among PC Makers
The problems at the PC makers run deeper. Mark Hurd has been
criticised for cutting R&D at HP, but there is little to be gained
from spending on making a better PC when you don't own enough of the
technology to keep any gains for yourself. PCs are commodity computers
that yield low profits, always at risk from price cuts by rivals and
unexpected increases in component costs. This means that any real
differentiation has to come from customer service, which (unlike
Apple's) can't be built around already profitable local retail
outlets.
Companies like Autodesk bringing
AutoCAD back to the Mac* can only make the Windows situation worse.
Architects can't afford the risk and expense of having project data
wiped out by a virus, so they will move at least some of their AutoCAD
licenses to Mac Pros. Large, powerful iMacs are well priced
and attractive for showing pictures and details to clients, and if
architecture firms find OS X users more productive, a sector used
to buying expensive Windows workstations will progressively move to
Mac.
Apple already controls the consumer market for $1,000-plus
computers, and Windows can ill afford to lose business sectors like
this.
A New Hope for Microsoft
However, all is not gloom and doom for Microsoft. Few in the Android
market are making money, and even fewer have enough patents to protect
them in the US market. If Oracle wins
its Java suit against Google, Android will certainly carry a cost,
and the more Microsoft forces the Androids to pay license fees for its
own patents, the more attractive Windows Phone 7 looks.
Steve Ballmer could still escape from this mess if the iPad/Mac
erosion is less than looks likely and there is a rush to Windows Phone
7 as the Android bubble
deflates. 
