TEXT-Fitch: NPD PC sales data don't reflect true Windows 8 demand

Dec 5 - Data indicating that U.S. retail sales of Microsoft -based
PCs declined 21% year over year in the four weeks ended Nov. 17, 2012 does not
provide an accurate view of demand for Windows 8, according to Fitch Ratings.
The NPD Group data period actually starts five days before the launch of Windows
8 and includes one-off constraints, such as Hurricane Sandy and significant
discounts on existing Windows 7 inventory, both of which reduced demand for PCs,
particularly those with Windows 8.

Five days, or nearly 20% of NPD's evaluation period, excluded any sales of
Windows 8 PCs since it was not available until Oct. 26, 2012. Furthermore, PC
demand in those five days was particularly depressed, as consumers postponed PC
purchases ahead of the imminent release of Windows 8. A strong pipeline of
announced, but yet to be released PC products, particularly those with
touchscreens, also contributed to weak PC demand in this period.

Hurricane Sandy also had an adverse effect on PC demand during NPD's study.
Retail consumer spending overall, particularly for discretionary items such as
PCs, was materially affected for at least several days following the storm,
which hit just three days after the introduction of Windows 8. Aggregate
same-store sales growth of only 1.6% for 17 large retailers in November, nearly
52% below analyst growth expectations, shows the storm's effects continued
through the month.

Significant discounts on excess inventory of Windows 7 PCs, many containing an
older Intel processor (Sandy Bridge) and lower graphics capabilities, also cut
into demand. We believe the excess inventory and five days of unavailability in
NPD's study contributed to Windows 8 accounting for only 58% of total unit sales
in the four weeks after its launch compared with 83% for Windows 7 in the four
weeks after its launch.

Microsoft reportedly sold 40 million licenses for Windows 8 since its release on
October 26, 2012, approximately in line with Window 7 in its first month of
availability. Microsoft did not disclose what percentage of Windows 8 licenses
were upgrades versus those sold to original equipment manufacturers (OEMs) for
use in new PCs.

Contact:

John M. Witt, CFA
Senior Director
Corporates
+1 212 908 0673
Fitch Ratings
33 Whitehall Street
New York
NY 10004

Kellie Geressy Nilsen
Senior Director
Fitch Wire
+1 212 908 9123

Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email:
brian.bertsch@fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market
commentary page. The original article can be accessed at www.fitchratings.com.
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