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Microsoft’s Fiscal 3Q16: How Much Can We Really Blame the Fall of PCs?

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Global PC shipments fell by ~10% in 1Q16

The PC market significantly impacts Microsoft (MSFT) because the company generates the majority of its revenue from the PC market. The PC market fell to its lowest levels since 2007, continuing its decline in 1Q16.

Gartner’s recent estimates show that globally, PC shipments fell by 9.6% to 64.8 million units in 1Q16. IDC estimates show global PC shipments fell by 11.5% to 60.6 million units. Since 2007, 1Q16 marked the first time when PC shipments fell below 65 million units, which means this latest fall in PC shipments reached the lowest level in almost a decade.

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According to Gartner, among the top five vendors—namely, Lenovo (LNVGY), HP (HPQ), Dell, Asus, and Apple (AAPL)—Apple and Asus were the only players that experienced rises in PC shipments. Here, IDC differed from Gartner, as the former’s estimates show that all players’ sales, including those of Asus and Apple, declined as well.
Microsoft's Fiscal 3Q16: How Much Can We Really Blame the Fall of PCs?

Factors that led to the decline of global PC shipments

The strengthening US dollar (UUP), of course, continued to play a significant role in the global decline in PC shipments. According to Mikako Kitagawa, a principal analyst at Gartner, “The deterioration of local currencies against the U.S. dollar continued to play a major role in PC shipment declines.” Apart from currency fluctuations, volatility in commodities and stocks dampened PC shipments around the world.

Although all key geographies saw declines in PC shipments, Latin America (ILF) showed the steepest fall of 32.4% in 1Q16. Brazil (EWZ), in particular, impacted the Latin American PC market while the region’s economy reels under a host of issues, including spiraling unemployment, high inflation, political turmoil, stagnant economic growth, high fiscal deficit, deep recession, and downgrades from rating agencies.

Gartner is hopeful that the adoption of Windows 10 will accelerate toward the end of 2016, which should bring some respite to the sluggish PC space.

Continue to the next part for an analysis of Microsoft’s MPC (More Personal Computing) segment.

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