Continued sluggishness in the PC market

Earlier in the series, we discussed how Microsoft’s (MSFT) Intelligent Cloud segment performed. In this part, we’ll discuss how its MPC segment performed. Microsoft’s MPC (More Personal Computing) segment consists of Windows OS (operating system) licensing, hardware, and devices including Surface, Lumia, HoloLens, and Windows phones, and gaming products like Xbox consoles.

The MPC segment’s revenues fell 5% to $11.8 billion in fiscal 2Q17. In constant currency terms, its revenues fell 4%. As expected, sluggishness in the PC market impacted the MPC segment. The segment draws close to ~50% of its total revenues from the PC market.

ZDNet, citing Gartner’s estimates, stated that 2016 was the fifth straight year with a fall in PC shipments. PC shipments fell 5.2% on a YoY (year-over-year) basis to 269.7 million units in 2016. IDC estimates showed a 5.7% decline in PC shipments in 2016.

Lenovo (LNVGY), HP (HPQ), and Dell are still the top three vendors in the PC space. Gartner and IDC’s results showed that they witnessed some growth in last quarter of 2016.

Sluggishness in the PC Market Impacted Microsoft’s MPC Segment

Windows 10 adoption

Windows OEM Pro derives its revenue from the business PC market. Despite softness in the PC market, Windows OEM Pro’s revenue grew 6% on a YoY basis in fiscal 2Q17. Continuing its trend of highlighting Windows 10 adoptions, Microsoft said, “Gamers are increasingly turning to Windows 10 premium PCs for the best gaming experiences, logging more than 26 billion hours of game play on PCs and tablets this year.”

In March 2017, Microsoft modified Windows 10 for China’s (FXI) government in an attempt to meet the country’s tough security demands.

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