It's still not red-hot growth by anybody's standards. But, sales of personal computers did improve in Q2 for the second quarter in a row -- and for the third quarter in the past five. Information technology consultancy IDC reports shipments were up 3% year-over-year, while technology market research house Gartner estimates they grew 1.1%. Both figures are certainly more encouraging than another decline.
Familiar suspects, HP, Lenovo, and Dell Technologies, were the big winners. All outpaced the overall average growth pace, whereas Apple and Acer lost ground. Broadly speaking, that's been the pattern since the second quarter of last year, when the PC market finally took a turn for the better.
Perhaps most importantly, it looks like this unlikely growth will continue.
Another quarter of slow, steady progress
Given the sizable slate of doubts surrounding the PC industry, theoretically at least, this should not be happening. Gartner's senior analyst Mikako Kitagawa acknowledges Intel (NASDAQ: INTC) isn't manufacturing enough computer processors, and the tariff war being waged between China and the United States is making it difficult to secure components or sell finished products to important overseas markets.
Image source: Getty Images.
There's also the not-so-small matter that many people are using smartphones and tablets in place of conventional computers and laptops, a concern that was raised by Gartner earlier this year. Yet, there it is. The very same Gartner reported on Thursday that worldwide sales of PCs were up 1.1% for the third quarter of the year, following the second quarter's 1.5% improvement.
Gartner preliminary worldwide PC shipment estimates by vendor for Q3-2019
|Company||3Q19 Shipments||3Q19 Market Share||3Q18 Shipments||3Q18 Market Share||Change (YOY)|
|Lenovo (OTC: LNVGY)||16.8||24.7%||15.9||23.6%||5.8%|
|HP (NYSE: HPQ)||15.3||22.4%||14.6||21.7%||4.6%|
|Dell (NYSE: DELL)||11.3||16.6%||10.7||15.9%||5.5%|
|Apple (NASDAQ: AAPL)||5.1||7.5%||5.3||7.9%||(3.7%)|
Data source: Gartner quarterly PC shipment update. All shipment figures are in millions.
IDC's estimate looks more or less the same. Lenovo outsold HP, though just barely. And Dell logged a respectable third place. All three saw decided upticks in total unit shipments.
IDC preliminary worldwide PC shipment estimates by vendor for Q3-2019
|Company||3Q19 Shipments||3Q19 Market Share||3Q18 Shipments||3Q18 Market Share||Change (YOY)||Company||3Q19 Shipments||3Q19 Market Share||3Q18 Shipments||3Q18 Market Share||Change (YOY)|
|Lenovo (OTC: LNVGY)||16.8||24.7%||15.9||23.6%||5.8%||Lenovo||17.3||24.6%||16.2||23.6%||7.1%|
|HP (NYSE: HPQ)||15.3||22.4%||14.6||21.7%||4.6%||HP||16.8||23.8%||15.4||22.5%||9.3%|
|Dell (NYSE: DELL)||11.3||16.6%||10.7||15.9%||5.5%||Dell||12.1||17.1%||11.5||16.8%||5.3%|
|Apple (NASDAQ: AAPL)||5.1||7.5%||5.3||7.9%||(3.7%)||Apple||5.0||7.1%||5.3||7.7%||(6.1%)|
Data source: IDC quarterly PC shipment update. All shipment figures are in millions.
The factors underpinning PC demand in the second and third quarter aren't likely to abate quickly, which sets the stage for continued demand at the same level for the foreseeable future.
Three reasons consumers and companies are buying
Both Gartner and IDC suggest that one reason people are buying more PCs is the renewed migration from older versions of Microsoft's (NASDAQ: MSFT) Windows to the newer Windows 10.
Though it's been available for four years now, Windows 10 only became the most utilized Windows operating system late last year when it eclipsed not Windows 8, but Windows 7. As of September, Net Marketshare says Windows 7 is still running 34.6% of desktop and laptop computers, versus 45.2% for Windows 10.
It matters, simply because Microsoft will discontinue free support and updates for Windows 7 in January of next year. Individuals and institutions alike will be forced to pay for support beyond that. For many, it makes sense to upgrade to a new OS. And, for a large proportion of that segment of PC owners, it makes even more sense to pay for a new computer than buy a new operating system that wasn't explicitly meant to run on aging hardware.
Recent hardware advancements are also piquing the interest of consumers and companies that simply can't limit themselves to tablets to meet their computing needs. Still other PC users are compelled to plug into new graphics cards and CPUs from Advanced Micro Devices (NASDAQ: AMD), but need newer computers to power that hardware. And, the new Microsoft Surface Pro X slated for release in November is a business person's dream portable device that ordinary consumers will want as well.
In that same vein, while the first PCs with factory-installed Windows 10 are now four years old, the average PC (including laptops and tablets) is now six years old. Computer security outfit Avast noted earlier this year that more than half of those machines are running outdated software that's vulnerable to hackers, viruses and malware. Another spate of computer security concerns could finally drive a wave of replacement.
Rise in PC purchases bolsters the bullish case
Again, single-digit sales growth isn't especially strong forward progress. While the pillars of demand for computer purchases are arguably in place for 2020, it seems unlikely the big three in the business -- HP, Lenovo and Dell -- will be able to meaningfully accelerate their current pace.
Any investors concerned that tepid or even poor PC demand is a liability for these companies need not fear. While HP may be underperforming on the printer front and Lenovo also faces stiff competition from higher-profile smartphone makers, surprisingly enough, the personal computing pieces of these organizations is a source of stability, and even modest growth. It could be for a few more quarters.
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