Windows Phone, The PC Market, And Global Smartphone Shipments

Windows Phone sales aren’t doing well. According to the latest IDC data, 7.4 million Windows Phone units shipped in the second quarter of 2014. That’s down from 8.2 million in the year-ago quarter.

Microsoft’s smartphone platform saw its market share fall from 3.4 percent to 2.5 percent in the year period. In comparison, the lager smartphone market grew from 240.5 million units in the second quarter of 2013, to 301.3 million units in the second quarter of 2014.

So, as the smartphone market grew, Windows Phone shrank.

The 300 million smartphone number is interesting, as the 300 million unit mark is a notable measuring stick for something else: yearly PC shipments. As PC sales have declined, the market for the computing segment has reached something akin to stability at the 300 million per year rate. This means that smartphones are now about four times more popular than PCs, on a global basis, in terms of sales. Of course, you replace your smartphone more often than you do your laptop, but, the comparison is worth some meditation.

All this mixes the following way: Microsoft’s market share in the PC game is massive. But for the larger Windows platform to grow, the only workable market is smartphones. And there it is going backwards, both in terms of units sold and market share.

Ergo, Windows is shrinking.

To his credit, Microsoft’s CEO Satya Nadella recently commented on this directly, saying that his company controls only 14% of the larger device market, despite its massive PC market share. So, the company’s leader groks the market dynamics. It’s the numbers that are tough.

In broad terms, presuming 90 percent market share for Microsoft is PCs, about 67.5 million Windows PCs were sold in the most recent quarter. Using the 7.4 million Windows Phone figure, we can see that smartphone shipments for Microsoft were just under 10 percent of the combined Windows Phone and Windows device figures in the second quarter.

It will be interesting to track that ratio, which is currently about 1:10.

The faster Larger Windows grows, the greater that ratio will be — at 2:10, for example, Windows Phone — keeping PCs stable for this bit — would sell at around the 15 million unit rate per quarter, or about 5 million per month.

The faster Windows Phone grows, the faster Windows grows. We should lay bets on what the ratio of Windows Phone:Windows PC sales will be in a few years. The irony is that if PCs decline further, it will bolster the Windows Phone side of the equation.

As an aside: Based on some pretty simplistic math, I came to a slightly higher number for shipments in the second quarter. But whenever we are digging through growth figures, it doesn’t hurt to be conservative.