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PC sales have fallen for five years. They will never return to the glory days. But the PC is a long way from extinction.

Many of us still need personal computers for our work. They do things phones and tablets cannot. They do other things better than phones or tablets. Not everybody needs to do those things. And not everyone needs to do them well.

PCs are no longer centre stage. That's one reason we don't need to replace them as often as before. For the most part they are also better made. Another reason we spend less time upgrading them.

Five years of decline

Less need means fewer sales. The computer industry reports 2016 will show another year of declining shipments. That means five years of falling shipments and sales.

Sales may fall, but the market remains huge. It will stay big for some time yet. Last year the industry shifted close to US$175 billion of hardware. That's a lot of money. The bulk of it goes to half-a-dozen companies. They all come away with billions in revenue, if not profit.

There are bright spots. Sales of hybrid devices that combine elements of traditional laptops and tablets are booming. IDC Australia reports convertibles — another name for hybrids — grew 91 percent year on year. New Zealand is seeing a similar interest in these models. It a small sector compared with the entire market, but enough for a renewed optimism in some quarters.

Two other PC sectors are strong.

Life at the top

High-end computers, especially laptops, continue to sell in large numbers. Apple and Microsoft show computer makers can command premium prices. The MacBook Pro and SurfaceBook models are not cheap, but sell well.

Business, media and creative types will pay more for better quality, powerful PCs. They want modern specifications, sleek designs and innovative new features. Microsoft's latest Surface Studio fits this category. While some whinge about new MacBook Pros' missing features, they sell in reasonable numbers.

Apple shows one way for laptop makers to succeed. It sells few computers compared with, say, HP. It isn't among the top five PC makers by unit numbers. But Macs make Apple more than US$20 billion a year in revenue.

Moreover Apple makes a profit from computers. By some estimates it makes more profit from its small market share than some of the big guns make.

Most PC makers have seen sliding sales. The downturn has not hit Apple as hard. It had one declining year in 2012, otherwise it has grown while the others decline.

Cause for optimism

Sales of high-end laptops are set to grow this year and next. The growth may be sluggish; one or two percent at best. Yet compared with the total market which is dropping at 10 percent or more, that is reason for optimism.

The other bright spot is with low-priced models. Chromebook sales are racing ahead in some parts of the world. This year they will account for 15 percent of US PC sales.

If the high-end and the low-end are growing, there's a collapse in the middle of the market. In effect, there are now two distinct PC markets. Cheap and cheerful machines at near throw-away price or glitzy high-end models.

After five years of decline, PC makers are learning how to cope with the disappearing middle. Until this year brands like HP and Lenovo would pump out models to fill every niche regardless of the demand. Then discount the unwanted models until stocks cleared. If you think that sounds like a recipe for losing money, you'd be right.

Today they are more selective. The big brands are more focused on selling the models with the best margins. That means moving upmarket and moving down-market, not messing with Mr Inbetween. Both HP and Lenovo have improved profits by learning which machines not to make. HP's strategy is paying off. In the most recent quarter it saw better than expected growth of 2 percent.

It's not much, margins are still wafer thin, but they are improving.

PC down, not out was first posted at billbennett.co.nz

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