PC Market Trackers See Improving Trend: Is It Sustainable?

It seems that the PC market is moving toward stabilization as is evident from the recent worldwide PC shipment preliminary results for fourth-quarter 2014 released by two research firms — Gartner and IDC. Although the data released by the companies have disparities, both the firms agree that there has been a slight improvement in the PC market.

According to Gartner's report, PC shipments during the fourth quarter improved 1% year over year to 83.7 million units with Hewlett-Packard Company HPQ gaining the most — up 16% — in worldwide PC shipment. However, H-P's 18.8% market share is only second to Lenovo Group's 19.4%.

Boasting the market leading position, Lenovo Group's PC shipments grew 7.5%, while Dell ended the quarter at the third place with 12.7% market share. Acer Group and Asustek Computer secured the fourth and fifth positions with respective market shares of 8.1% and 7.5%.

On the other hand, IDC reported that PC shipments have fallen 2.8% year over year to 80.8 million units. However, this is much lower than the research firm's earlier forecast of a 4.8% decline. Further, PC shipments for full-year 2014 declined 2.1% year over year to 308.6 million units.

Moreover, according to IDC, the fifth position, in terms of market share, is held by Apple Inc. AAPL with 7.1% share. Per IDC, Lenovo, Hewlett-Packard, Dell and Acer hold the first, second, third and fourth position with respective market shares of 19.9%, 19.7%, 13.5% and 7.7%.

The differences in results are mainly due to different techniques used for tracking PCs. For example, IDC includes Chromebooks which run on Google Inc.'s GOOGL Chrome operating systems, while Gartner does not. Similarly, Gartner includes certain Microsoft Corp. MSFT machines, which IDC considers to be tablets.

Both the firms believe that the improved PC shipment results are mainly driven by higher spending in mature markets due to system refreshes and enterprise system migrations beyond the Microsoft XP operating system. The reduction in PC prices by vendors is turning out to be a positive factor.

Moreover, these firms stated that PC market cannibalization by tablets is weakening. Both the firms noticed strong sales growth of PCs in the U.S., EMEA and Western Europe, while emerging markets lag due to strong attraction for smartphones and tablets.

Though the recent IDC and Gartner reports indicate an improving trend in the PC market, it is yet to be seen if the trend is sustainable. Over the long run (until 2018), IDC expects a further decline in PC shipments. IDC had predicted that PC shipments will decline 3.3% in 2015, which compared unfavorably with an even earlier projection of a 2.3% decrease.

One of the major reasons for the decline in PC sales is the cost of the devices. In the emerging markets, consumers are opting for relatively inexpensive mobile computing devices such as tablets at the entry level.

To sum up, the current phase of system upgrades and PC refresh cycles remain the near-term catalysts for the industry. From a long-term perspective, PCs have to compete with other computing devices as returning to growth still remains a distant possibility. The decline will hurt the business prospects of companies like Hewlett-Packard and Intel Corporation INTC that rely substantially on the sale of PCs.

Currently, Apple and Intel sport a Zacks Rank #2 (Buy), Hewlett-Packard and Google have a Zacks Rank #3 (Hold) while Microsoft carries a Zacks Rank #4 (Sell).