According to a recent survey conducted by Gartner,
) lost its position as the world's top PC maker to China's Lenovo
Group Ltd. This marks the end of a six-year long spell as the
world's leading personal computer manufacturer.
Not only did HP lose its leadership position, which it has held
since 2006, but the company also lost a substantial amount of its
market share during this time. As per the recent data from IDC,
Hewlett-Packard's share tumbled to 15.9% from 17.4% in the previous
quarter. Lenovo's share climbed to 15.7% from 13.1%.
While management issues have been a lingering problem for the
company, the flagging economic conditions and a paradigm shift from
computers to mobile devices, such as those offered by companies
), Samsung and others have also hurt revenues.
Separately, a survey by IDC showed that HP still holds the
leadership position when measured in terms of worldwide PC
shipments. However, here too, H-P's leadership is at a threat as it
managed a mere lead of roughly half a percentage point. The studies
reveal that HP is going through a tough phase.
We believe HP lost its market share, first as HP has relatively
higher manufacturing costs, since all its operations are not
located in China and other low-cost areas. Therefore it is not able
to price its products as competitively. Second, most of the current
demand for computing devices is coming from developing
Therefore, there is a greater demand for cheaper PCs that HP is
not going to be able to provide. This is the reason the company
decided to sell off the PC business, but later changed its strategy
because investors didn't take that so well. So, weak demand is
impacting HP same as other PC makers.
HP is not competitive enough in emerging markets, so a lot of
individuals and even small companies are moving to lower-cost
devices. According to Gartner, global PC shipments declined 8.3%
from the year-ago quarter to 87.5 million. Separately, IDC reported
a decline of 8.6%.
The PC industry experienced double-digit growth during most of
the years as the companies and households switched to notebook
computers from traditional PC's over the last year and a half,
before the trend changed toward iPads and smartphones.
The PC industry is now seeing a boost from the introduction of
Windows 8 during the current month, the new version of
) window's operating system.
Lenovo's achievement of the top position marks a new era in
Chinese computing history. The Chinese company moved into the PC
market in 2005 with the acquisition of IBM's personal computer
division. In the second quarter, it grew market share to 15.7%,
shipping around 13.77 million units, which is an increase of 10%
compared to the year-ago period.
Lenovo has benefited from certain acquisitions it made. The
company is also benefiting from the growth in emerging markets,
which is superseding developed markets.
To add to investor concerns, HP recently provided a bearish
outlook. HP's CEO Meg Whitman said that investors should not expect
a recovery until fiscal 2014, when current investments would
generate returns. She also said that high executive turnover in
recent years have dampened HP's business.
HP is particularly bearish on the enterprise business. The
company projects enterprise services revenue to decline 11.0% to
13.0% during fiscal 2013. Operating margins are estimated to range
from break even to 3.0%.
Some industry experts commented that the competitive PC market
has pulled down its margins significantly and reduction in IT
spending is another headwind. Also, a declining personal computer
business has largely affected HP's business activity.
HP's outlook appears particularly bleak when compared with that
), which raised its full-year 2013 earnings outlook.
Currently, HP has a Zacks #3 Rank, implying a short-term Hold
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