The world of personal computing is in flux. Traditional PC users are finding new and creative ways to accomplish their computing goals. For a two to three year span, some people found tablets to be their go-to personal computing devices. For other users, the smartphone continues to be a more than an adequate mobile computing device. Part of this transition comes from the growth in cloud computing over the past few years. As businesses continue to invest in cloud infrastructures, their services and applications are being built lighter and off loading a lot of processing power to the cloud. People who used to depend on desktops or laptops to process their resource-intensive workloads are now shifting their workflows to thinner clients and browsers. The need to own a PC is slowly eroding.
Unfortunately, for both Microsoft and Intel, many of their recent efforts to resuscitate the PC market have been met with a growing apathy towards traditional devices. Intel CEO Brian Krzanich doesn’t see the mounting indifference in recent PC adoption changing anytime soon, even with Microsoft’s latest Windows 10 offering. During a shareholder meeting, Krzanich disclosed, “We are going through another transition, Windows 10 upgrades…We’re seeing some quarter-to-quarter pushing, but we continue to take a view of our long-term forecast. The PC market should be flat to slightly down mid single-digits over the long-term.” Krzanich’s realization comes on the heels of Gartner's first quarter report of a 5.2% drop in quarterly global shipments year over year. Business Insider is also reporting that Intel had to cut nearly a billion dollars off their revenue forecast in March due to weak demands for business desktop PCs and the end of a Windows XP upgrade cycle.
While the forecast for the PC market looks all but fated for Intel and Microsoft, both companies are looking to new horizons for transition. Much like Microsoft, Intel is looking for growth outside of their traditional money makers. Intel is hoping that their investment in their data center business will offset their losses in PC sales. Fortunately for Intel, the company saw an 18% growth in their data center business and the company expects to see the Data Center Group grow into a $14 billion dollar endeavor this year alone. Last quarter, Intel reported that their Data Center Group brought in $1.7 billion in operating income. According to Intel, the Data Center Group accounted for 65% of Intel's total for last quarter. That increase in operating income made the group the largest of any Intel business segments last quarter. Krzanich expands, “We look at it as our next big growth engine for the company.”
Like Intel, Microsoft finds themselves in a similar transitional period. With free upgrades going out to consumer PCs later this year, as well as restructuring their traditional big box licensing approach to Office, Microsoft is investing in their other businesses to keep them buoyed through the next few rough quarters. The competition hasn’t been stagnant or lenient to either company, to further complicate situations. We have yet to know if either Microsoft or Intel can make a financially successful switch from their dependencies on the PC market, to becoming market leaders in other businesses. Fortunately, for Microsoft and Intel, the measured decline in PC shipments is still buying them a few more quarters to figure it out.