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Strong PC Shipments Witnessed in Q1: Gartner, IDC

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The two independent research firms — Gartner Inc. IT and International Data Corporation (“IDC”) – yesterday reported their worldwide PC shipment data. Although the numbers of both firms are different, they have one similar opinion that the worldwide PC shipment has shown concrete signs of improvement in the very first quarter of 2017.

According to Gartner, although PC shipment declined year over year, it is rather modest compared with several previous quarters. On the other hand, as per IDC, PC shipment recorded its first growth in the last five quarter.

Decline Moderated – Per Gartner

The preliminary data released by Gartner showed that PC shipments in the quarter were down 2.4% year over year to 62.2 million units. The decline marked the 10th straight quarter of year-over-year fall, which is the longest duration of decline in the history of the PC industry.

During the quarter, the industry witnessed modest growth in business PCs for the first time, after several quarters of decline. However, demand for consumer PCs continued to decline as various customers refrained from replacing their older PCs, while some consumers stopped using PCs as they can do their work on other mobile devices.

Gartner stated that among the top six vendors, Asus and Acer witnessed declines in PC sales, while the likes of Lenovo, HP Inc. HPQ, Dell and Apple AAPL recorded growth during the first quarter. However, companies under the Others category witnessed a 12% drop in PC shipments.

Lenovo managed to retain its leading position with 19.9% market share. Most importantly, the company registered a year-over-year increase in PC sales for the second time in a row, after witnessing a decline for several quarters. Lenovo saw 1.2% growth in PC sales during the first quarter.

HP Inc. and Dell were the other gainers during the quarter, and recorded the fourth consecutive quarter of year-over-year growth. Holding the second spot among worldwide PC vendors, HP Inc. registered 6.5% growth in PC shipments and raised its market share to 19.5% from 17.9% in the year-ago quarter. Dell, which occupied the third position, witnessed 3.4% growth and raised its market share to 15% from 14.2% in first-quarter 2016.

After making a comeback in fourth-quarter 2016, Apple continued to witness year-over-year growth in the first quarter as well. During the quarter, the company’s Mac sales climbed 4.5%, which helped it to improve its market share to 6.8% from 6.3%. It holds the fifth spot among the top six PC vendors.

Asus and Acer held the fourth and sixth spots respectively, witnessing a year-over-year decline in PC shipments of 14% and 1.8%.

First Growth After Five Years – Per IDC

IDC stated that after witnessing decline for consecutive five years, worldwide PC shipments registered its first growth in this quarter. During the first quarter, PC shipments grew 0.6% year over year to about 60.3 million units. According to, Jay Chou, research manager, IDC PCD Tracker "The traditional PC market has been through a tough phase, with competition from tablets and smartphones as well as lengthening lifecycles pushing PC shipments down roughly 30% from a peak in 2011."

The difference in data is mainly due to different techniques used for tracking PC sales as well as the inclusion and/or exclusion of certain products. For example, unlike Gartner, IDC includes Chromebooks, which run on Alphabet Inc.’s GOOGL Chrome operating system. Gartner, on the other hand, takes into account Microsoft Corp. MSFT tablets and "detachables" such as the iPad Pro and the Asus Transformer, which are not taken into account by IDC.

In the top vendors list too, the firm has a different opinion. According to IDC, HP is the leading PC vendor, with 21.8% market share followed by Lenovo, Dell, Apple and Acer with respective market share of 20.4%, 15.9%, 7% and 6.8%.

Talking about the geographical performance, IDC revealed that PC shipment in the U.S. and Asia/Pacific (excluding Japan) (APeJ) slightly declined year over year, while that in Europe, the Middle East and Africa (EMEA) and Japan grew marginally. Notably, sales in Japan witnessed year-over-year growth for the third consecutive quarter.

What’s Ahead

Although, both firms reported encouraging first-quarter PC shipment data, their forward looking statements makes us slightly cautious about the prospects of the PC industry. Both firms agreed that the recent surge in DRAM prices and short supply of SSD will lead to an increase in PC prices.

Mikako Kitagawa, principal analyst at Gartner said that, "The price hike will suppress PC demand even further in the consumer market, discouraging buyers away from PC purchases unless it is absolutely necessary. The price hike started affecting the market in 1Q17. This issue will grow into a much bigger problem in 2Q17, and we expect it to continue throughout 2017." IDC also predicted that consumer demand will remain under pressure.

Computer - Peripheral Equipment Industry 5YR % Return

Computer - Peripheral Equipment Industry 5YR % Return

Bottom Line

In the emerging markets, consumers are increasingly opting for relatively inexpensive mobile computing devices, such as smartphones. The increase in functionality and larger screen sizes (5 inches and above) are boosting the demand for such devices. Additionally, the ongoing transformation in the way people communicate has led to the proliferation of mobile devices.

Therefore, we believe that PC manufacturers have to deal with cost of device to ensure long-term growth. Furthermore, in our opinion, PC vendors’ focus on innovative products such as 2-in-1s, and thin and light notebooks, as well as technology enhancements can make customers opt for a new PC.

According to Ms. Kitagawa, principal analyst at Gartner, "While the consumer market will continue to shrink, maintaining a strong position in the business market will be critical to keep sustainable growth in the PC market. Winners in the business segment will ultimately be the survivors in this shrinking market.” He further cautioned, "Vendors who do not have a strong presence in the business market will encounter major problems, and they will be forced to exit the PC market in the next five years. However, there will also be specialized niche players with purpose-built PCs, such as gaming PCs and ruggedized laptops."

From the long-term perspective, PCs have to compete with mobile computing devices. The decline will hurt the business prospects of companies like HP Inc., Intel Corp. INTC, Seagate Technologies STX and Western Digital WDC, which continue to depend substantially on PC sales.

Currently, Apple, Alphabet and Seagate carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HP Inc. and Western Digital each carry a Zacks Rank #3 (Hold). Intel and Microsoft have a Zacks Rank #4 (Sell).

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