The worldwide PC market has shown signs of turnaround in the second quarter of 2019 after witnessing a slowdown in shipment in the last two quarters. This is evident from the recently released worldwide PC shipment data by Gartner Inc. IT and International Data Corporation (IDC).
Per Gartner’s preliminary data, PC shipments in the second quarter inched up 1.5% year over year to 63 million units. Going by the IDC report, shipment rose 4.7% on a year-over-year basis and totaled 64.9 million in the period under review.
Buoyant demand in the commercial market owing to the transition to Microsoft’s MFST Windows 10 is boosting PC shipment growth. Moreover, improvement in Intel’s INTC CPU shortage helped PC vendors cater to old orders and ship a healthy stockpile of new PCs into the channels, per IDC.
According to Gartner, Lenovo LNVGY, HP HPQ and Dell Technologies DELL were the top three vendors, grabbing a combined 64% share of the market.
Computer - Mini computers Industry 5YR % Return
Computer - Mini computers Industry 5YR % Return
How Are the Vendors Placed?
Lenovo has been benefiting immensely from its joint venture with Fujitsu. This China-based company has regained its top berth in the reported quarter with 25% market share per Gartner as well as IDC. Notably, the company achieved the highest growth level in shipments in the quarter.
HP slipped to the second spot with 23.7% market share per IDC and 22.2% share per Gartner. However, the company witnessed an upturn in shipment after suffering a decline in the last two quarters.
The company’s focus on product innovation & differentiation, pricing plus marketing and sales activities is yielding results, which is evident from its strong growth across all key geographies. Solid progress in Chromebooks shipments is also a tailwind.
Dell, which held the third position, recorded the sixth consecutive quarter of PC shipment flourish in the second quarter. Increasing adoption of its commercial PCs, driven by wider coverage, small and medium business and Windows 10 refresh cycle is a boon. The company witnessed 3.1% growth during the quarter under consideration, going by IDC.
Coming to Apple AAPL, the firms have different opinion as Gartner states that Apple registered a 0.2% dip while its shipment improved 9.6% year over year per IDC. Its 6.3% market share in the period under discussion climbed from 6% in the year-ago quarter, per IDC, which ranks the company at fifth slot after Acer.
Apple’s focus on improving Mac sales is very crucial for the company. In the last reported quarter, Mac sales, which accounted for 9.5% of the metric, decreased 4.6% from the year-ago quarter to $5.51 billion.
The Road Ahead
Although, both firms reported encouraging second-quarter PC shipment data, their forward-looking statements make us slightly cautious about the PC industry’s prospects. The ongoing U.S.-China trade war and imposition of additional tariffs are making the outlook unpredictable for the PC market.
IDC feels that the PC market has been “artificially” propped up as the fear of higher tariffs prompted some PC vendors to transit additional units of desktops and notebooks in the quarter. Further, Gartner added that with the levy of tariffs, the laptops and tablets manufactured in China could face a significant price hike in the United States.
Moreover, with the passage of Window’s 10 replacement cycle in January 2020, demand from the business circle is anticipated to weaken, which raises a concern.
All these factors raise worries not just for the PC vendors but also the companies dependent on those. Notably, the chip-makers are expecting a rebound from their flagging fortunes in the second half of 2019. However, with the PC vendors shipping surplus units during the second quarter, higher inventories can induce bigger setbacks for chipmakers throughout the year, which makes us a bit more apprehensive about the space.
While Lenovo sports a Zacks Rank #1 (Strong Buy), HP has a Zacks Rank #2 (Buy). Besides, Apple and Dell carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
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