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PC Market Slumps as Shipments Sink in Q4 Per Gartner & IDC

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According to the recently released worldwide PC shipment data by independent research firms, namely Gartner Inc. IT and International Data Corporation (“IDC”), even the back-to-school season failed to lift the PC market.

Per Gartner’s preliminary data, PC shipments in the fourth quarter of 2018 fell 4.3% year over year to 68.6 million units. Going by IDC, worldwide PC shipment also dipped 3.7% on a year-over-year basis and totaled 68.1 million in the final quarter. However, this downside was lower than IDC’s previous forecast of 4.7% although the firm added that it determined the lowest sequential growth level for a holiday phase since the fourth quarter of 2012.

As expected, the firms provided different figures, mainly on varied techniques used for tracking PC sales as well as the inclusion and/or exclusion of certain products.

For example, IDC includes Chromebooks, which run on Alphabet’s GOOGL Chrome operating system while Gartner considers ultramobile premiums, such as Microsoft MSFT Surface but not Chromebooks or iPads.

What is Affecting the PC Market?

Although the two firms chose different data-compilation techniques, yet both highlighted almost similar reasons for the market plunge. They agreed that Intel’s INTC CPU shortages coupled with sluggish consumer demand due to political and economic unrests like the ongoing U.S.-China trade war, dragged down PC shipments.

Gartner stated that vulnerability among buyer groups, such as small and mid-size businesses (SMBs), sparked uncertainties in the U.S. market. Besides, consumer demand laid low as holiday sales no longer play a major role in driving demand for PCs, added the firm.

Moreover, the forward-looking statement made by IDC makes us slightly cautious about the prospects of the PC industry. The firm anticipates the PC market in China to suffer bigger setbacks throughout the year. Further, the firm informed that the severity of the trade spat will gather steam to snowball its impact into other countries due to the exchange rate fluctuation influencing businesses across the region.

However, IDC expects processor supply, which will remain a key threat in the first two quarters of 2019, to improve before the final quarter of the year.

Gartner presumes that with improvement in CPU availability, demand created in business markets owing to transition to Windows 10, will be perked up this year.

Computer - Mini computers Industry 5YR % Return

Computer - Mini computers Industry 5YR % Return

Let’s now assess the reports prepared by the two firms.

Top Vendors

Per both IDC and Gartner, Lenovo Group Ltd. LNVGY maintained its top spot in the December quarter, driven by its joint venture with Fujitsu. Moreover, among the leading vendors, only Lenovo and Dell recorded growth while HP HPQ, Apple AAPL, Acer and Asus witnessed soft PC sales during the fourth quarter.

Per Gartner, Lenovo held 22.5% market share followed by HP, Dell, Apple, Acer and ASUS with 21.7%, 16.2%, 6.9%, 6.1% and 6% share, respectively.

According to IDC, Lenovo held 24.6% market share. HP and Dell held the second and third positions with 23.6% and 16.5% market share each. While Apple held the fourth position with 7.2% share, Acer occupied the fifth spot with 6.7% share.

Holding the second spot among worldwide PC vendors, the fourth quarter was a risky one for HP. After four consecutive quarters of growth, the company witnessed a shipment decline in most crucial regions except Asia/Pacific and Japan, added Gartner. HP had a monopoly with 33.4% market share in the United States but fell 7.6% in the quarter. IDC stated that the company’s growth in the United States was a challenging one due to unfavorable comparisons as it witnessed strong results in the year-ago quarter.

Coming to Apple, IDC announced that the company witnessed a slip of nearly 3.8% in the quarter as both desktop and notebook shipments dropped on a year-on-year basis.

In terms of shipment volume, Lenovo recorded 5.9% growth per Gartner while IDC’s estimate stands at 1.3%.

Gartner pointed out that Dell inched up 1.4%, backed by an outperformance in EMEA and Japan. However, the downfall in Asia/Pacific and Latin America was a dampener. IDC stated that the company saw highest growth of 1.6% among the foremost OEMs.

Region-Specific Performance

Per Gartner, U.S. PC shipments decreased 4.5% to 14.2 million due to weak consumer demand despite holiday season sales as well as SMBs. Notably, HP, Apple, Microsoft and Acer experienced a contraction in U.S. PC shipments during the quarter under review.

Meanwhile, IDC had a different opinion. Per the firm, the United States registered a modest uptick in PC shipments to 16.7 million units. This upside was attributed to the ongoing Windows 10 refresh cycle, which led to robust demand in the commercial segment. Per the firm, barring HP, the other principal five vendors mostly saw shipment volume expansion in the region.

Gartner estimated that PC shipments were lower by 3.8% to 20.9 million units in Europe, the Middle East and Africa (EMEA) due to waning demand for consumer PCs. However, the firm noted that demand for desktops and ultramobiles in western Europe fueled SMB shipments. Moreover, Windows 10 renewals benefited the government sector. Demand in Russia, Czech Republic and Hungary also continued to recover.

IDC noted that the region came up with negative results for the first time in the last six quarters. Decline in shipments of desktop and notebooks resulted from the dearth of components and ongoing geopolitical and economic tensions within the major economies in the belt.

Per Gartner, showing a 4.6% year-over-year reduction, the Asia Pacific region’s PC shipments totaled 24.2 million units. Tensions surrounding the US-China trade ties and the fluctuating equity market impacted demand. The China market slid 2.5% year over year in the quarter under discussion but observed 5.6% sequential growth.

IDC cited that Asia/Pacific (excluding Japan) (APeJ) region showed a single-digit decline due to higher channel inventory and scanty Intel CPUs. Moreover, slowdown in spending from the public sector in China hit results. Additionally, U.S.-China trade concerns adversely impacted private sector demand.

In Japan, the industry showed strength, backed by migration to Windows 10, according to IDC.

Currently, stocks like HP, Lenovo, Intel, Microsoft and Apple have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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