PC Buyers Still Far From Stores

According to the latest report by the research firm iSuppli, PC sales in the first quarter of 2009 fell 8.1% year-over-year and 14.1% quarter-over-quarter to 66.5 million units, driven by a 23% drop in desktop shipments, despite a 10% increase in laptop sales. This decrease represents the largest decline in seven years. iSuppli attributed this decline to weaker-than-expected desktop sales. iSuppli had initially expected a decline of 4% in the quarter.

The decline in PC shipment led major companies to reverse their outlook. Hewlett-Packard (HPQ - Analyst Report) with a market share of 19.7% retained its number one position for the 11th consecutive quarter, with 13 million units shipped in the first quarter, flat compared to the year-ago period. The company provided conservative guidance due to declining PC shipments, which is expected to hurt revenue in the 2Q as rapidly deteriorating conditions in the global market weaken demand.

Dell Inc. (DELL - Analyst Report), the second-ranked PC OEM, sold 8.8 million PCs, a 18.7% drop from the year-ago period. The company's market share declined to 13.2% in the first quarter. According to iSuppli, 'Dell's performance in the first quarter was heavily influenced by its weak desktop shipments, which dragged down its overall market share'. Decrease in the sale of PCs led the company to reiterate a cautious outlook.

Toshiba has no desktop business and sales increased 13.2% year-over-year in the 1Q due to its strong portable business. Acer, a leader in netbooks, saw sales growth of 9.5%. Toshiba and Acer both retained their market share of 5.2% and 11.1%.

Concerns over the worldwide recession and the fear of rising unemployment coupled with decline in corporate profits, highly illiquid capital markets and the recessionary outlook are likely to dampen corporate capital spending, going forward. As consumer confidence wanes and IT spending reduces, we see no signs of recovery in PC sales in the 2Q and fiscal 2009. As a result of the sluggish desktop shipments and severe global economic recession, the research firm iSuppli has severely cut down its forecast for the PC sales to 0.7% from its previous expectation of 4.3% in 2009.