NEW YORK ( TheStreet) -- The PC market is weak, that's not a secret. It's a shock just how weak it actually is, as tablets continue to dominate consumers mindsets, and wallets. The lackluster performance of Windows 8 is one of the major reasons why. Trends are so bad in the PC space, Goldman Sachs analyst Heather Bellini downgraded Microsoft ( MSFT) to "sell," lowering her price target to $27, reflecting "worsening PC trends and a lack of traction in tablets and smartphones." She noted that she sees a lack of near-term catalysts to support earnings, and isn't expecting any major strategy shifts, despite Windows 8 being a flop. There is one caveat, however, with Microsoft being able to explore "Plan B" options to boost shareholder value. These options include a breakup of the company (low probability), leveraging the balance sheet (low to medium), cutting prices to reignite growth (medium to high), or reducing expenses (low to medium). Research firm IDC notes that, in the firstquarter of 2013, PC shipments fell 13.9% year-over-year to 76.3 million units, sharply worse than the 7.7% IDC forecast. This is the worst contraction since IDC started keeping data, and it's mostly due to tablets and smartphones taking over, and businesses not believing in Microsoft's ( MSFT) Windows 8 operating system. "At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said Bob O'Donnell, IDC program vice president, clients and displays, in the press release. Apple ( AAPL) isn't immune to the slowdown, seeing a 7.5% decline year over year in the U.S. market according to IDC. But Apple is a different beast. Apple's iPad is the best selling tablet in the marketplace, according to IDC's fourth-quarter data. It's worth noting that Gartner, another research firm, sees something entirely different for Apple, growing 7.5% year-over-year to 1.65 million units. Despite this discrepancy, the overall trend from both Gartner and IDC is clear. Tablets are dominating the PC, and that trend isn't stopping anytime soon. This PC shipment news doesn't take iPad sales into account. It's clear that iPads and other tablets are heavily affecting PC sales, and Apple, with its first mover advantage in the tablet space, is enjoying the benefits.
Almost the entire PC space saw a decline, as companies like HP ( HPQ), Dell ( DELL), and Asus saw declines worldwide. Only Lenovo was able to show flat growth worldwide, and actually showed improvement in the U.S. market, growing 13% to 1.27 million units. Both HP and Dell are undergoing massive restructuring efforts, and Lenovo has been able to take advantage of that, with an aggressive product strategy. One interesting tidbit is that this isn't just about price, as the bottom end vendors aren't growing in the U.S., so it's not just about shelling out less dollars for any old computer. Companies are having a hard time innovating, and that's being seen in the results. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Commodity_Bull