What does Microsoft's Windows sales announcement tell us about PC sales?

PC sales are going well - but how do they compare with previous years? Photograph: Arcaid / Rex Features

Microsoft says that it has sold 400m Windows 7 licences. As I noted back at the end of April when Microsoft said it had shipped 350m licences, the takeup has gone better, proportional to the total number of PCs sold each year, than it did with Windows XP in 2001 (and definitely better than with Vista in 2007).

But what do those two numbers – the 350m and the 400m – taken together with their dates of announcement tell us about PC sales in the second quarter?

Actually, they suggest that they aren't going that swimmingly. Here's why.

In the second quarter of 2010, the research companies Gartner and IDC say that about 80m Windows PCs were sold (I've subtracted the number of Apple Macs sold for the quarter). In the second quarter of 2009, the figure was 66m. (So that was a rather impressive year-on-year growth of about 20% from 2009 to 2010.)

So: 350m sold by 22 April (the blogpost actually says "more than", but let's round it down, because that puts a better light on PC sales for this quarter.)

Two months (and a week) later, Microsoft is saying that it has sold an additional 50m licences. Assuming that sales have been going at a steady rate through the quarter, that implies sales of just 75m PCs in the second quarter - which would be a 6% dip. That's quite substantial, and if correct, would come after a 2% dip in Windows PC sales in the first quarter. Possible reasons could include financial squeezes on businesses and the Japan earthquake slowing business in the Far East.

One factor that objectors might raise: my calculation in April showed that Windows 7 licences were 67% of PC shipments in the first 18 months. (That's because you get an overlap with older systems, including XP and Vista.) If that's still the case, then that 75m would actually be 125m. But as there's never been the slightest sign of the PC market ever hitting that size, we can discount that as wrong. The 67% figure for the first 18 months will have arisen because of that OS release overlap; but now you can't get XP - Microsoft stopped selling it on October 22 - so it's Windows 7 all the way now.

Allow perhaps for some small mix of Vista licensing and/or "white boxes" being shipped without licences, and you're still looking at zero or very small growth in PC sales over 2010 - perhaps a total of 80m. Financial snalysts such as Richard Windsor at Nomura forecasting a total growth of only 3% in PC sales this year.

Yes, but what does it mean? It means less money for Microsoft. If there were only 75m Windows PCs sold in the second quarter, that translates directly to its bottom line.

Going by Microsoft's own financial results (whose fourth-quarter figures are coming up next week), the three-year average for revenue per Windows PC sold is $56.47, and profit is $39.91.

Plug those in to two scenarios and the following emerges for the Windows division:
• 75m PCs sold: revenue: $4.23bn; profit $2.99bn
• 80m PCs sold: revenue: $4.52bn; profit: $3.2bn.

Those are still big numbers - but they're not showing the growth that Steve Ballmer might have hoped for. (The 75m is pretty pessimistic; the 80m would be level-pegging with the first quarter, but if netbook sales have collapsed further then it might be too large.) Those Windows 8 tablets really can't come soon enough.

Update: There is another confounding factor which might mean that the number of PCs sold is actually higher than 80m, but that Windows licences aren't following them: PC sales in China. The Wall Street Journal in May reported a speech in which Ballmer noted that Microsoft only gets about 5% of the revenue from China that it gets from the West, because of rampant piracy. For 2011, the WSJ noted, IDC "projects PC unit shipments in China are likely to increase 12% to 71 million units, just shy of the 75 million units in the U.S., where it expects sales to be flat."

If those shipments aren't matched by Windows licences, then we could see an increase in PC sales even while Microsoft's revenue from them doesn't grow. It's a possibility: we'll find out next week.

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What does Microsoft Windows distribution announcement you inform us about PC sales?

PC sales are good - but how they compared to previous years? Photo: Arcaid / Rex features

Microsoft says that it has sold 400 m Windows 7 licenses. As mentioned back at the end of April when Microsoft said it had delivered 350 m licenses, the storage better gone, proportional to the total number of PCs sold each year, as it is with Windows XP in 2001 (and in any case better than with Vista in 2007).

-But do the two numbers 350 m and 400 m - be together with their announcement tell us about the PC sales in the second quarter?

Actually, they suggest that they are not, go the swimmingly. Here is the reason.
In the second quarter of 2010, the research company Gartner and IDC say that about 80 m were sold Windows PCs (I've deducted sold for the quarter the number of Apple Macs). In the second quarter of 2009 was the figure of 66 m. (Sun, that was a pretty impressive previous year growth of about 20% between 2009 and 2010.)
So: 350 m from 22 April sold (the blog post actually says "greater than", but let down, round us, because that puts a better light on PC sales for this quarter.)

Two months (and a week) later Microsoft says that it has sold an additional 50 m licenses. Assuming that sales through the district are to go, implies, sales of only 75 m PCs in the second quarter - which would be one 6% dip. This is quite significant and if properly, according to a 2% of bath in the Windows-PC sales in the first quarter would come. Possible causes can financial squeezes on companies and the earthquake in Japan slows business in the far East included.

One of the factors that could cause of conscience: my calculation in April showed that 7 licenses Windows 67% of PC shipments in the first 18 months. (This is because you get an overlap with older systems, including XP and Vista.) If this is still the case, then, would be that 75 m 125 m. But as there has never ever been the slightest hint of the PC market meeting this size, we can as the wrong discount. The figure of 67% for the first 18 months will release due to its OS overlap occurred. but now you not XP - Microsoft stopped on October 22 - sales, making it now the way Windows 7.
Allow maybe some small mix of Vista licensing and/or "white boxes" without licenses delivered will and Windsor at Nomura are still looking to 0 (zero) or very small growth 2010 - perhaps a total 80 m. financial Snalysts such as Richard PC forecast total growth rate of only 3% in PC sales this year.

Yes, but what does it mean? It means less money for Microsoft. There were only 75 m in the second quarter Windows PC directly on the bottom line sold, translated.
Going to Microsoft's own financial results (numbers come from the fourth quarter until next week), three-year average sales per Windows PC sold is $56.47, and profit is $39.91.

Close the two scenarios and the following result for the Windows Division:
• 75 m PCs sold: revenues: $4. 23bn; Enjoy $2-. 99bn
• 80 m PCs sold: revenues: $4. 52bn; Profit: $3 billion.
Are still large numbers - but they are not showing the growth of the Steve Ballmer could have hoped for. (75 M is pretty pessimistic, level access to the first quarter, but if more sales have reduced NetBook would be 80 m then may be too large.) This Windows 8 tablets are not really early enough can.

Update: It is actually higher than 80 m is what could mean that the number of PCs sold an another confusing factor, but the Windows licenses are not for them: PC sales in China. The Wall Street Journal in May reported a speech in the Ballmer said that Microsoft just about gets 5% of the revenue from China, which receives from the West, due to the rampant piracy. For 2011, Wall Street Journal IDC announced "projects PC unit shipments in China are 12% to 71 million units, just shy of 75 million units in the United States where it expected sales that flat increase."

If these programmes accesses Windows licenses are not, could we see doesn't grow sales PC even during Microsoft's revenue from them. It's a way: we find out next week.

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