The announcement of 400m Windows 7 sales so soon after 350m were sold might seem like good news ? but PC sales trends tell a different story
Microsoft says that it has sold 400m Windows 7 licences. As I noted back at the end of April when Microsoft said it had shipped 350m licences, the takeup has gone better, proportional to the total number of PCs sold each year, than it did with Windows XP in 2001 (and definitely better than with Vista in 2007).
But what do those two numbers ? the 350m and the 400m ? taken together with their dates of announcement tell us about PC sales in the second quarter?
Actually, they suggest that they aren't going that swimmingly. Here's why.
In the second quarter of 2010, the research companies Gartner and IDC say that about 80m Windows PCs were sold (I've subtracted the number of Apple Macs sold for the quarter). In the second quarter of 2009, the figure was 66m. (So that was a rather impressive year-on-year growth of about 20% from 2009 to 2010.)
So: 350m sold by 22 April (the blogpost actually says "more than", but let's round it down, because that puts a better light on PC sales for this quarter.)
Two months (and a week) later, Microsoft is saying that it has sold an additional 50m licences. Assuming that sales have been going at a steady rate through the quarter, that implies sales of just 75m PCs in the second quarter - which would be a 6% dip. That's quite substantial, and if correct, would come after a 2% dip in Windows PC sales in the first quarter. Possible reasons could include financial squeezes on businesses and the Japan earthquake slowing business in the Far East.
One factor that objectors might raise: my calculation in April showed that Windows 7 licences were 67% of PC shipments in the first 18 months. (That's because you get an overlap with older systems, including XP and Vista.) If that's still the case, then that 75m would actually be 125m. But as there's never been the slightest sign of the PC market ever hitting that size, we can discount that as wrong. The 67% figure for the first 18 months will have arisen because of that OS release overlap; but now you can't get XP - Microsoft stopped selling it on October 22 - so it's Windows 7 all the way now.
Allow perhaps for some small mix of Vista licensing and/or "white boxes" being shipped without licences, and you're still looking at zero or very small growth in PC sales over 2010 - perhaps a total of 80m. Financial snalysts such as Richard Windsor at Nomura forecasting a total growth of only 3% in PC sales this year.
Yes, but what does it mean? It means less money for Microsoft. If there were only 75m Windows PCs sold in the second quarter, that translates directly to its bottom line.
Going by Microsoft's own financial results (whose fourth-quarter figures are coming up next week), the three-year average for revenue per Windows PC sold is $56.47, and profit is $39.91.
Plug those in to two scenarios and the following emerges for the Windows division:
? 75m PCs sold: revenue: $4.23bn; profit $2.99bn
? 80m PCs sold: revenue: $4.52bn; profit: $3.2bn.
Those are still big numbers - but they're not showing the growth that Steve Ballmer might have hoped for. (The 75m is pretty pessimistic; the 80m would be level-pegging with the first quarter, but if netbook sales have collapsed further then it might be too large.) Those Windows 8 tablets really can't come soon enough.
Update: There is another confounding factor which might mean that the number of PCs sold is actually higher than 80m, but that Windows licences aren't following them: PC sales in China. The Wall Street Journal in May reported a speech in which Ballmer noted that Microsoft only gets about 5% of the revenue from China that it gets from the West, because of rampant piracy. For 2011, the WSJ noted, IDC "projects PC unit shipments in China are likely to increase 12% to 71 million units, just shy of the 75 million units in the U.S., where it expects sales to be flat."
If those shipments aren't matched by Windows licences, then we could see an increase in PC sales even while Microsoft's revenue from them doesn't grow. It's a possibility: we'll find out next week.
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