Hewlett-Packard and Lenovo, the top global suppliers of
personal computers, both gave evidence of a much-needed PC
industry rebound in their recent quarterly results.
The personal computer market was slammed in 2013, suffering
its worst year ever as shipments fell 10% from the prior year,
down 35 million units. If current trends hold, shipments could
fall another 7% this year, estimates tech-research firm
The silver lining is that the worst of the decline could be
over, as suggested in the reports byHewlett-Packard (
) and China-based Lenovo.
Revenue from HP's PC-centric Personal Systems Group rose 7%
from the prior year to $8.2 billion during its fiscal second
quarter, which ended April 30. It was the group's highest level
in three years.
"Overall, we're seeing a slowing market contraction and signs
of stabilization, particularly in commercial PCs," HP CEO Meg
Whitman said in the post-earnings conference call on May 22.
"This is coupled with support from a refresh of an aging
installed base and the expiration of Windows XP."
Lenovo, which reported quarterly earnings on May 21, said that
portable PC shipments rose 13% while desktop units climbed 6.8%.
For the quarter ended March 31, Lenovo reported a 19%
year-over-year rise in revenue to $9.4 billion. Net profit rose
to $158 million from $127 million a year earlier.
The PC market's slow improvement has been a while coming. The
PC market hit a peak in 2011 with global shipments of 361 million
units. A year later, shipments fell 3% to 351 million units, then
declined another 10% in 2013, according to Gartner.
The decline in PC shipments, including laptops, started with
the widespread use of the smartphone and continued with the
arrival of tablet computers.
"In the past, the PC was the only device consumers could use
to connect to the Internet," said Mikako Kitagawa, PC industry
analyst at Gartner.
Wireless smartphones and tablet users easily surf the Web on
the go. As a result, the PC is no longer the center of their
universe. "People began to hold on to their PC or laptop longer,"
That's partly because consumers were spending more of their
disposable income on smartphones and tablets while also paying
monthly fees for data-service plans.
1 Billion Smartphones
Smartphone shipments topped 1 billion units in 2013, up 38%
from 2012. Shipments of tablet computers rose 68% to 195.4
million units in 2013.
The PC market decline was evident in the third quarter of 2012
when chip leaderIntel (
) said that quarterly revenue fell 5% from the prior year. It was
the first of four straight quarters of revenue declines for the
) reported six straight quarters of year-over-year revenue
declines in the same time frame.
As further evidence of the disruption, PC maker Dell took
itself private last year rather than deal with the harsh
spotlight of Wall Street. Six years ago, Dell was the largest PC
maker worldwide, but it has since dropped to third place behind
HP and Lenovo.
And early this year, Sony exited the PC market after 17 years,
as rivals from China and Taiwan brought low-cost PCs to
The PC market is now dominated by five companies: Lenovo, HP
and Dell, followed by Taiwan's Acer and Asus. Together, these
five account for about 60% of the PCs sold globally.
) has just more than 5% of the global market and 11% of the U.S.
market. The remaining PC suppliers have a third of the market but
a much smaller share of the profit.
While a shift to cloud computing has increased demand for
computer servers used in data centers, large companies such
) andGoogle (GOOGL) are building their own equipment.
The rise of cloud services has also prompted businesses to
forgo buying additional computers, choosing instead to rent time
and applications running on cloud-computing networks.
Though the worst of the PC decline might be over, the
Acer's PC shipments fell 20% in the first quarter from the
year-ago period, according to research firm IDC. Q1 revenue fell
16.6% to $2.5 billion. On the plus side, Acer returned to a
profit, albeit a modest $37,000, after posting losses for three
PC shipments at Asus fell 8% in the first quarter. The
combined total outside of the top five PC manufacturers dipped
13%, IDC reported.
"We'll continue to see consolidation in the PC market,"
As it becomes increasingly difficult to thrive by selling
basic PCs, manufacturers have developed newer systems that are
ultra-light and slim to compete with tablet computers while
introducing their own tablets and diversifying in other ways.
Early this year, Lenovo announced it would buy Google's
Motorola handset division for $2.9 billion to extend its
smartphone business. Lenovo also has a line of tablets.
The Trend Is Tablets
While Apple's U.S. PC shipments have slowed, the company has
continued to thrive due to its enormous strength in smartphones
"We continue to believe that the tablet market will surpass
the PC market in size within the next few years, and we believe
that Apple will be a major beneficiary of this trend," Apple CEO
Tim Cook said on an April 23 conference call with analysts after
the company reported quarterly earnings.
Apple led the tablet market with a 36% share in 2013, down
from a 53% share in 2012, as rivals such as Samsung have upped
The gradual improvement in the PC market is coming mainly from
the business side. Consumer sales have remained weak.
In Hewlett-Packard's latest quarterly report, the company said
that consumer sales declined 3% year-over-year, while commercial
sales grew 8%. The refresh on the business side is partly a
result ofMicrosoft (MSFT) having announced that it would end
support for its Windows XP operating system, putting many
businesses in a position to upgrade.
"Some PC makers saw a spike in the business market due to the
replacement of systems running Windows XP," Kitagawa said. "But
when it comes to the consumer side, there is not as great a
In a bid to spur consumer sales, PC makers have introduced a
variety of new styles, including two-in-one portables that
function as laptops or tablets.
"The newer portables coming to market are nice and looking
sleek and in the right price range," Kitagawa said.