News Column

PC Sales Drop Sharply in Third Quarter

Oct. 11, 2012

Kirk Ladendorf

PC

Global shipments of personal computers fell by 8.6 percent from last year as the industry's soft sales trend continued.

International Data Corp. reported Wednesday that PC makers shipped 87.8 million systems in the quarter, down from 96.1 million units in the same quarter last year. The results fell considerably below IDC's projection for a 3.8 percent market contraction.

"PCs are going through a severe slump," said IDC analyst Jay Chou. "A weak global economy as well as questions about PC market saturation and delayed replacement cycles are certainly a factor."

The weak third quarter follows sub par results in the first half of the year. In the first quarter, shipments dropped by 5.3 percent from a year ago, and in the second quarter they were down another 0.1 percent.

Both Intel Corp. and Advanced Micro Devices Inc., the two main suppliers of processor chips for the PC industry, say they expect to seek weak results this quarter, which in most years is a strong sales quarter for the industry. Round Rock-based Dell Inc. also said it expects its sales will drop between 2 and 5 percent in its third quarter, which ends this month.

Analysts said the slowing global economy has weakened computer demand in emerging markets such as China and India. And the rapid growth of mobile devices seems to be winning a stronger share of consumer spending.

In a soft market, China's Lenovo Group nearly captured first place in the quarter. It shipped 13.8 million units for a 15.7 percent market share to rank just behind Hewlett-Packard Co. which shipped 13.9 million and had a 15.9 percent share. Dell Inc. was a distant third with 9.5 million units for a 10.8 percent share. Dell's shipments were down 14 percent from a year ago. Taiwan's Acer Group and Asustek Computer were fourth and fifth with 8.4 million and 6.4 million units respectively.

It remains uncertain whether the industry will pick up in the fourth quarter after the formal launch of Microsoft Corp.'s new Windows 8 software, which begins shipping this month. Analysts' early reviews of the software have been mixed. And business adoption of new operating system software is historically slow and gradual. Dell Inc. says only about half the world's sizable companies have even migrated to the current Microsoft software, Windows 7, which was unveiled in 2009.

Analyst Roger Kay with Endpoint Technologies Associates said the results confirm Lenovo Group's emergence as a powerhouse in the industry. Lenovo has introduced strong new products and gained growth rapidly this year while recent market leaders Hewlett-Packard Co. and Dell Inc. have stumbled. Lenovo, which acquired IBM Corp.'s PC business in 2005, is based in China but has substantial operations in North Carolina.

"They are doing the right things and not making mistakes," Kay said. "If you look at Dell and HP, they have made different sorts of errors and lost momentum."

HP's personal computer business was thrown off kilter last year when the company's former management signaled that it would sell that part of the business. New management at the company has reversed that decision, but HP is retrenching and reorganizing its business. The company said in September that intends to cut 29,000 jobs worldwide by the end of 2014.

Meanwhile, Dell has openly said over the past year that it will sacrifice sales in consumer PCs rather that chase sales with too-thin profit margins.

Lenovo, Kay said, has cut costs and seems to be able to make a profit even while selling low-priced commodity computers. About 90 percent of its unit sales are outside the United States.



Source: (c)2012 Austin American-Statesman, Texas. Distributed by MCT Information Services


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