PC vendors are in for a tough time ahead as the latest IDC report revealed that PC shipments are expected to decline 9.7% in 2013. The current annual projection worsened from the research firm’s earlier forecasts of a 1.3% drop (projected in March) and a 7.8% decrease (forecasted in May) for 2013, primarily due to the continued shift in consumer preferences toward mobile devices.
What’s worse, IDC traces the slump to softness in emerging markets, which has for some time supported growth. PC shipments in emerging markets are expected to be down 9.8% in 2013, steeper than the 9.4% year-over-year decline in mature markets.
China appears to be the main reason for the lowered forecast, due to continued shift in customer preferences toward tablets and smartphones. IDC says that some inventory has accumulated in the channel.
Despite these mundane and disappointing 2013 projections, IDC expects the rate of decline to moderate and a slow rebound in PC shipments after 2014 aided by system refreshes and businesses opting for system migrations beyond Windows 7. However, the lack of new and enhanced applications could pose challenges.
The PC market is already in the doldrums as the second-quarter PC shipments were down 11.7% from the year-ago period. The top 3 global PC vendors – Lenovo, Hewlett-Packard (HPQ - Analyst Report) and Dell – have not only recorded a decrease in shipments but also contractions in market shares. On a geographic basis, PC shipments were down across the U.S., the EMEA and the Asia/Pacific.
We believe that the emergence and rapid adoption of handheld computing devices from Apple (AAPL - Analyst Report), Samsung and other Asian companies are cannibalizing PC sales and this trend may be expected to continue.
This also raises a question about the future of the PC industry and the prospects of companies relying substantially on the sale of PC’s (H-P and Dell). Related markets, such as security are also feeling the pinch; with important players like Symantec Corp. (SYMC - Analyst Report) exiting the market altogether.
We believe that the ability to migrate to mobile platforms and/or data centers may be the only possible solution for these players.
Currently, Hewlett-Packard, Dell, Apple and Symantec carry a Zacks Rank #3 (Hold).