PC Market Rebound: Green Shoots of Recovery or Irrational Exuberance?

It’s only natural that when things aren’t going well that we look just about anywhere for signs of hope. Witness the latest news about the personal computer market.

IDC reports that worldwide PC shipments returned to positive growth in the third quarter of 2009 (Q309) with an increase of 2.3% after three consecutive quarters of decline. Sounds hopeful, but then again the increase is attributed to what the consultant called strong back-to-school demand. Perhaps more of interest to the business side of the world, however, the decline of commercial PCs also started to slow in Q309, “providing a hint that IT spending will gradually pick up in upcoming quarters,” said IDC. Then again, a slowing decline is still a decline, so I doubt anyone is counting chickens just yet. 

According to IDC's Worldwide Quarterly PC Tracker, the strong showing in Q309 and growth in key segments will lead to net growth of 1.3% for 2009, and set the stage for further gains throughout the forecast period. As part of that trend, the commercial sector is expected to rebound in the second half of 2010.

Looking forward, IDC said the overall market is expected to quicken the pace of growth in 2010, but the increase is not going to come from a recovering U.S. economy per se. Instead, it is forecasted to be fueled by sales in “emerging regions,” which are expected to show double-digit growth for 2010. “Mature markets” (that’s the U.S.) are projected to make “steady gains.” Since desktop shipments are forecasted to be roughly flat in 2010, portable PCs will account for the gains—assuming commercial buyers, such as insurance companies and brokers, will buy more of those. 

But what will fuel increased demand among commercial entities for portable PCs? Certainly it can’t be that there will be more employees who will need to have these units, since even now the layoffs continue in some sectors. While unemployment has ticked down slightly with seasonal hiring, I am not seeing any forecasts that say that we will recover jobs in significant numbers any time soon. Thus, it seems unlikely there will be any increase in demand based on employee numbers. 

IDC suggests that one possible driver of new portable PC purchases may be an aging base of installed units that need to be replaced. In normal economic times I could buy that, but amid the current malaise, it seems probable that commercial entities will hold on to and/or update their current computers. So the normal three-year replacement cycle could easily expand to four or even five years. 

Finally, assuming the forecasts are correct for the commercial sector, where will the money come from to make these additional purchases? I can certainly see insurers pouring more money into in-house efficiencies and customer-facing functionalities, but somehow the idea of purchasing new laptops doesn’t have quite the same urgency. Insurers and brokers are like anyone else in a down economy; they will spend more carefully and they will put their eggs in the baskets that deliver the most profitable omelets. 

It would be really nice to think that the forecasted upturn in PC sales means good things for business and the economy overall. Unfortunately, this particular story looks a lot more like irrational exuberance than anything else. Ultimately, we can’t start celebrating until we see meaningful increases in real jobs that create demand among commercial entities for more computers. Until that happens, let’s try to stay grounded in reality.