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As PC shipments drop, budget machines may offer relief

Could cheap, yet full-featured budget machines, help the PC market regain some of the ground it lost to tablets and other mobile devices?

The bad news keeps rolling in for Microsoft and PC manufacturers with market research firms Gartner and IDC Wednesday reporting record declines in global PC shipments for the first three months of 2013. Gartner said PC shipments saw an 11.2 percent decline compared to the prior year, while IDC said it was closer to 14 percent.

The numbers may differ, but the basic message is the same: The PC market ain't what it used to be, and, for PC makers, something needs to change.

Since the introduction of Window 8, PC makers have focused on high-priced ultrabooks, convertibles, and hybrids to take advantage of Windows 8's touch-centric start screen. Take Samsung's latest notebook, announced Thursday. The Series 9 Premium Ultrabook with Full HD is sure to appeal to road warriors looking for a sleek PC, with its 13.3-inch display featuring 1920-by-1080 resolution, a 2.0GHz Intel Core i7 processor, 4GB RAM, and a 128GB solid state drive. But with a cost of $1400, the Series 9 Premium is not exactly priced to fly off the shelves.

Computer makers like to produce machines like this because the margins earned on them are higher, meaning you can move less product for more profit. But the PC market's bread and butter has always been about delivering large numbers of low-cost PCs to businesses and consumers year in and year out. And that's one reason why declining PC shipments are such big news.

Price pressures

Both Gartner and IDC, when not blaming Windows 8 for the drop in PC shipments, point to pricing as a contributing factor. "The costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices," IDC's Bob O'Donnell said in a statement Wednesday. Gartner added that "demand for [portable PCs] remained slow as prices were still relatively high."

With PC makers focused on high-priced machines, entry-level notebooks during the early roll out of Windows 8 were no more interesting or feature-rich than previous generations. But that's changed in recent months with more laptops rolling out like the $500 touch-enabled Asus VivoBook x202.

Adding touch may only be the beginning in a surge of improvements to cheaper PCs. On Wednesday Kirk Skaugen, general manager for Intel's PC client group, said the company's upcoming "Bay Trail" Atom processors will deliver budget-priced hybrid PCs and notebooks with tablet-like battery life. Bay Trail-powered devices are expected to appear by the end of 2013 with prices less than $600 for everything from laptops with detachable screens to convertible notebooks and even desktop towers.

Could cheap, yet full-featured budget machines, help the embattled PC regain some of the ground it has lost to tablets and other mobile devices? Perhaps, but NPD's Stephen Baker argues that the best bet for the future of the PC is still with higher-priced devices. "Right now we are seeing a shift in sales volume away from under-$500 PCs and towards tablets in that same price point," Baker told PCWorld via e-mail. "We don't see the same level of shift between the two in products above $500." PC makers may be right to focus on high-priced, high margin devices and cede the cheaper price points to tablets. High-end machines are certainly a smaller market to cater to, but it just might be where PCs find the most success as people give up on laptops in favor of tablets for everyday use.


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