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PC Shipments Data for Q3 Out, Lenovo Reclaims Top Position

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PC Shipments Data for Q3 Out, Lenovo Reclaims Top Position

Third quarter PC shipments benefit from improving demand from businesses customers but weakness in consumer PC market is a concern.

The PC industry is not out of the woods yet as the recently released worldwide PC shipments data for third-quarter 2018 by two independent research firms — Gartner Inc. (IT) and International Data Corporation (“IDC”) — indicate.

Preliminary data released by Gartner displayed that PC shipments in the third quarter increased 0.1% year over year to 67.2 million units. However, the IDC report stated that PC shipments declined 0.9% from the year-ago period to approximately 67.4 million units but were lower than its expectation of 3% decline.

As expected, the firms provided different figures, which is mainly due to different 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.

IDC was of the opinion that processor shortages coupled with unfavorable currency movement and other politico-economic factors in the emerging markets were a dampener. Gartner, on the other hand, pointed out that continued weakness in consumer PC demand impacted results.

However, both the firms believe that the PC shipment benefited from higher demand in business markets due to migration to Windows 10.

Top Vendors

Per both IDC and Gartner, Lenovo Group Ltd. LNVGY took the top spot in the September quarter, reclaiming it from HP Inc HPQ, driven by its joint venture with Fujitsu.

Gartner stated that among the top six vendors, Apple AAPL, Acer and Asus witnessed declines in PC sales, while the likes of Lenovo, HP and Dell recorded growth during the third quarter.

Per Gartner, Lenovo held the leading position with 23.6% market share and witnessed the highest growth in PC sales (10.7%) during the third quarter.

Holding the second spot among worldwide PC vendors, HP registered 6.2% growth in PC shipments and raised its market share to 21.8% from 20.5% in the year-ago quarter. HP witnessed growth in desktop shipment on the back of strong demand among corporate buyers, added Gartner.

Although Gartner opined that HP was a leader with 30.7% market share in United States, growing 3.5% in the quarter, IDC stated that the company had a tough quarter in the country.

Dell, which occupied the third position, witnessed 5.3% growth and raised its market share to 16% from 15.2% in third-quarter 2017.

Apple, Acer and Asus held the fourth, fifth and sixth spots respectively, witnessing a year-over-year decline in PC shipments of 8.5%, 5.7% and 15.9%.

Although Lenovo, HP and Dell are the top three vendors for IDC also, the research firm has different names for the fourth and fifth position. Per IDC, Acer is in the fourth spot, while Apple holds the fifth position.

However, IDC agreed with Gartner on tumbling PC shipments at Apple and other smaller companies as well as increasing sales at Lenovo, HP and Dell. Nonetheless, it has a different view on Acer, as the firm saw an 8.5% rise in third quarter PC shipments as against Gartner’s projection of 5.7% decline. IDC mentioned that Acer’s focus on building a comprehensive Chrome OS portfolio and significant uptake in gaming notebooks is a key driver for the company.

Apple witnessed a decline of nearly 12% per IDC. Moreover, the firm added that it was the only top 5 company that underperformed the overall market.

Computer - Mini computers Industry 5YR % Return

Computer - Mini computers Industry 5YR % Return

Region-Wise Performance

Per Gartner, U.S. PC shipments declined 0.4% to 14.77 million due to a drop in mobile PC shipments while desktop shipments were flat. However, the region witnessed strong demand for business PCs. Gartner mentioned in its reports that Chromebooks continued to witness strong growth, particularly on the back of adoption by U.S. K-12 educational institutions, which, however, the firm does not consider.

IDC, on the other hand, had a different opinion. Per the firm, the United States recorded the third consecutive year-over-year improvement in PC shipments to 17.2 million units. The upside was attributed to increase in sales of notebook PCs in the commercial segment and growing demand for gaming systems in the consumer segment.

Gartner stated that Latin America, which showed some stabilization earlier in 2018, posted the steepest decline of 8.5% in the quarter. IDC also noted that Latin America witnessed year-over-year decline.

Gartner estimated that PC shipments rose 1.1% to 18.9 million units in Europe, the Middle East and Africa (EMEA). Rising sales of business PCs amid declining demand for consumer PCs backed results. IDC noted that the region delivered flattish results with demand for notebooks outnumbering desktops. Although the region witnessed higher demand from commercial market, component shortages were an overhang on overall growth in the region, added IDC.

Per Gartner, the Asia Pacific region’s PC shipments totaled 24.3 million units, showing 0.3% year-over-year increase driven by PC demand from the commercial segment and demand for mid-range to premium products in the consumer segment. The China market witnessed a gradual recovery, growing 0.8% in the quarter, after declining over the past few quarters. This remains a concern, added the firm.

IDC cited that although Asia/Pacific (excluding Japan) (APeJ) region showed a single-digit decline, results exceeded expectations. Positive demand from India boosted results. The firm stated that in China higher demand for ultraslim products boosted consumer and SMB shipments while the government segment was driven by Windows 10 renewals.

In Japan, the industry displayed strength backed by strong commercial activity on PC replacement and migration to Windows 10, according to IDC.

What’s Ahead?

Gartner stated that Intel’s INTC CPU shortage will result in subsequent price increases and change in vendor landscape in the short term. The firm, however, expects it to not have any long-lasting impact on overall PC demand.

Intel is expected to prioritize high-end CPUs and CPUs for business PCs as the shortage continues into 2019. Moreover, Advance Micro Devices AMD is expected to cater to markets where Intel cannot.

However, with the passage of Microsoft’s Window’s 10 replacement cycle in 2020, the demand from the business circle is anticipated to weaken, which poses concern.

Nonetheless, strong demand for notebooks, shipments of Chromebooks and growing demand more gaming systems provide respite to not just vendors but also the companies dependent on the industry.

Currently, HP, Lenovo and Apple carry a Zacks Rank #2 (Buy), while Intel and AMD 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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