Being associated with the personal computing complex was an awfully bad place to be Thursday, as hardware stocks sank following a duo of industry reports that showed a steep decline in the market for desktops and laptops.
Data from research groups Gartner and IDC, while not lining up exactly on the magnitude of the fall, nonetheless agreed that, in the first quarter of the year, the PC sector was on the skids. That sent shares of computer, chip and software sellers tumbling in response.
According to Gartner, worldwide PC shipments during the first three months of the year sank 11.2% from the comparable period in 2012, reaching only 79.2 million units. That's the first time it's recorded a reading below 80 million for a quarter in almost four years.
IDC put the number of global shipments at 76.3 million units in the quarter, 13.9% below the previous year, and registering the worst year-over-year showing since the firm began reporting on PCs each quarter in 1994.
"Consumers are migrating content consumption from PCs to other connected devices, such as tablets and smartphones," said Mikako Kitagawa, principal analyst at Gartner, in a prepared statement accompanying the data. "Even emerging markets, where PC penetration is low, are not expected to be a strong growth area for PC vendors."
At IDC, the measure of PCs includes desktops, portable computers, mini notebooks (not handhelds, though) and workstations. Gartner data factors in desktop and mobile PCs, including notebooks. Neither survey counts tablets in these totals.
While the stock market overall was higher, that did little to support PC-related companies' stocks in the wake of the grim reports.
Shares of Hewlett-Packard (HPQ) were down 6% at $21. Lenovo's (LNVGY) U.S.-traded stock was plunging 7.4% to $18.15. Dell (DELL), which is the subject of a takeover battle that for now effectively has put a floor under it, was off 0.6% at $14.13.
On the chip side, Intel (INTC) was falling 2.6% to $21.69, and competitor AMD (AMD) was off 3.4% at $2.52. Microsoft (MSFT), whose software powers so many non-Apple (AAPL) machines, was losing 4.9% to $28.81. Storage names Seagate (STX) and Western Digital (WDC) shed more than 3% each.
That the PC market is not the juggernaut it used to be isn't exactly news. The hideousness of the quarterly data, however, was.
"Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome," David Daoud, IDC's research director of personal computing, said in a press release on the firm's website. "The industry is going through a critical crossroads, and strategic choices will have to be made as to how to compete with the proliferation of alternative devices and remain relevant to the consumer. Vendors will have to revisit their organizational structures and go to market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation."
Interestingly, IDC further attributed at least some of the blame for the results on Microsoft's new operating system, Windows 8, whose interface is a major departure from the Windows 95-like updates the company has relied upon for well over a decade.
So unpopular has it been that Windows 8 "not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said IDC's Bob O'Donnell, program vice president of the clients and displays division, in the same release.
"While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices," he said. "Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market."
Those comments arrived just in front of a report in The Wall Street Journal that Microsoft is working on a new set of Surface tablet computers, including a 7-inch device.