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Gartner Cuts 2015 Outlook Amid PC Weakness, China Smartphone Slowdown

Tablet sales are also seen dropping more than 5 percent this year.

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Gartner says that the arrival of Windows 10 will slow rather than help a rebound in corporate PCs, while weakness in the Chinese phone market will hurt global sales in that once high-flying category.

As a result, the market research firm is cutting its forecast for 2015 PC and phone sales, saying it now expects this year’s growth to be just 1.5 percent from last year, down from an estimate three months ago that called for a 2.8 percent annual increase.

The total number of devices — 2.5 billion — is still a big one. However, prices are falling, meaning that total spending on PCs and phones is expected to drop for the first time since 2010, to $606 billion.

That leaves a lot of companies fighting for a shrinking pie — a recipe for further pain in two industries already suffering from brutal price competition. The PC market also finds itself in something of an existential crisis — forced to justify itself at a time where increasing amounts of work are being shifted to mobile devices. That leaves some believing that the venerable laptops and desktops could play a shrinking role in the corporate world, potentially opening the door for more appliance-like devices, such as Google’s Chromebook.

More immediately, global currency fluctuations are weighing on the market. That, Gartner says, is having a big impact on PC sales as computer makers are more cautious maintaining their inventory levels to avoid exposure to rapidly changing exchange rates.

On the phone side, things are still growing but less quickly. Gartner forecasts a 3.3 percent increase in unit shipments, but prices are falling and there are far fewer people who don’t already have a smartphone than there were a few years back.

As in the PC market, that is creating brutal price competition, evidenced by slower than expected sales at a number of global phone makers including Samsung and HTC, both of which just issued disappointing second-quarter results.

“We have witnessed fewer and fewer first-time buyers in China, a sign that the mobile phone market there is reaching saturation,” Gartner analyst Annette Zimmermann said in a statement. “Vendors in China will have to win replacement buyers and improve the appeal of their premium offerings to attract upgrades, if they want to maintain or increase their market share.”

Windows 10 may ultimately help the PC market but Gartner says for now it will slow things down. Businesses largely ignored Windows 8, which was a radical overhaul of the operating system aimed largely at consumers. Instead, they continued upgrading from Windows XP to Windows 7 — a migration that is now largely complete.

With Windows 10, though, Microsoft is actually aiming at corporations, having added new business-centric features as well as toning down some of the features that made Windows 8 less familiar to longtime Windows users. That’s important for the operating system’s long-term health. However, businesses don’t jump quickly to anything new, meaning IT departments will spend months testing the operating system before actually putting it in the hands of workers.

Even the once fast-growing tablet market is seeing declines. Gartner now expects sales of roughly 207 million tablets this year, down 5.9 percent from 2014.

“The tablet has become a ‘nice to have’ device, and there is no real need for an upgrade as regularly as for the phone,” said Gartner analyst Roberta Cozza.

Gartner’s move comes a day after chipmaker Advanced Micro Devices cut its quarterly sales forecast, blaming a weaker PC market.

This article originally appeared on Recode.net.

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