Microsoft analyst Rick Sherlund: No PC market growth left with increasing mobile demand

Television celebrity Ryan Seacrest, left, and Microsoft chief

Television celebrity Ryan Seacrest, left, and Microsoft chief executive Steve Ballmer listen during a demonstration of Windows 8 at the 2012 International Consumer Electronics Show earlier this year in Las Vegas. (Jan. 9, 2012) (Credit: AP)

The market for traditional personal computers has no growth left because people increasingly use mobile devices to connect to the Internet, said Rick Sherlund, an analyst at Nomura Holdings Inc. covering Microsoft Corp.

"People just don't need PCs the way they used to," Sherlund said Monday in a radio interview on "Bloomberg Surveillance" with Tom Keene. "They've got alternatives now for accessing the Internet. They've got smartphones and tablets, so there's really no growth left in the traditional PC market."

Microsoft, the world's largest software maker, has suffered along with the market for personal-computers, which consumers are increasingly shunning in favor of smartphones and tablets. The total PC market will contract by 1.2 percent to 348.7 million units this year, according to IHS ISuppli, the first annual decline since 2001.


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Sherlund recommends buying Microsoft shares, according to data compiled by Bloomberg.

Last week, Redmond, Wash.-based Microsoft said it has sold 40 million software licenses since the latest version of its flagship operating system, Windows 8, went on sale on Oct. 26. Some of that number included versions shipped to corporate customers with multiyear contracts, making it a poor indicator of consumer demand.

U.S. retail sales of PCs running Windows have been weak, with revenue declining 21 percent since the latest software release, compared with the same period a year earlier, according to a report last week by NPD Group Inc.

SURFACE TABLET

The decrease has been fueled by a 24 percent drop in sales of notebook computers as many customers opt for Apple Inc.'s iPad or tablets powered by Google Inc.'s software instead of Windows, NPD said. The report excluded Microsoft's own stores, where the company's Surface tablet is sold.

Microsoft last week said it will charge a minimum of $899 for its Surface Pro tablet, the version which has an Intel Corp. chip, and is targeted at corporate customers or those who want to use older Windows programs. The high price has analysts such as Wes Miller at Directions on Microsoft concerned it will put off tablet shoppers.

In order to better compete with Apple and Google, Microsoft is said to be moving to a new software development system for Windows that would involve issuing smaller, more frequent updates on more of an annual cycle, according to people familiar with the matter. The first such update is planned for next year.

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