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The Zacks Analyst Blog Highlights: Gartner, Alphabet, Microsoft and Apple

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For Immediate Release

Chicago, IL – Jan 15, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Gartner Inc. (IT - Free Report) , Alphabet Inc. (GOOGL - Free Report) , Microsoft Corporation (MSFT - Free Report) and Apple (AAPL - Free Report) .

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Friday’s Analyst Blog:

PC Market Moving Toward Stabilization: Garner & IDC

The two independent research firms — Gartner Inc. and International Data Corporation (“IDC”) — yesterday reported worldwide PC shipment data for the fourth quarter of 2017. Although the figures reported by both firms are different, they share a similar opinion that the worldwide PC shipment has shown concrete signs of improvement in the quarter.

Although the PC shipment declined year over year, Gartner’s data depicts that it is rather modest compared with several previous quarters. On the other hand, as per IDC, PC shipment recorded its “first positive holiday quarter shipment growth in six years.”

Decline Moderated – Per Gartner

The preliminary data released by Gartner displayed that PC shipments in the fourth quarter were down 2% year over year to 71.6 million units. The decline marked the 13th straight quarter of year-over-year fall, which is the longest duration of decline in the history of the PC industry.

As per the data compiled by Gartner, the overall PC market was mainly adversely affected by weak demand for consumer PCs. The decline in the segment came despite a record holiday season which signifies that PCs are no longer favorite gift items for the season, Mikako Kitagawa, principal analyst at Gartner, said in her note.

For the full year, PC shipments declined 2.8% from the prior-year level to 262.5 million units. This independent research firm highlighted a very interesting fact that in the last six or seven years, the PC industry has consolidated heavily. Gartner reported that in 2017, the top four vendors have combined market share of 64% which is much higher than the 45% grabbed by the top four vendors of 2011.

First Holiday Growth in Six Years – Per IDC

Unlike Gartner, the data compiled by IDC states that worldwide PC shipments registered the first growth in the last six holiday seasons. The difference in data is mainly due to separate 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 Chrome operating system. Gartner, on the other hand, takes into account Microsoft Corporation tablets and "detachables" such as the iPad Pro and the Asus Transformer, which are not taken into account by IDC.

During the fourth quarter, PC shipments touched 70.6 million units, marking year-over-year growth of 0.7% and outperforming the research firm’s earlier prediction of a fall of 1.7%. The growth was mainly driven by “commercial upgrades and pockets of improving consumer PC demand.”

For the full year, although IDC reported a 0.2% year-over-year volume decline in PC shipments, it stated that 2017 marks the most stable year for the industry since 2011. PC shipments were 259.5 million units during 2017.

Top Vendors List

Although both research firms’ data varies, they have similar views when it comes to ranking of top vendors. The firms agree that HP Inc. continues to be the market leader in the space, followed by Lenovo, Dell, Apple, Asus and Acer Group. Notably, Asus and Acer tied for the fifth spot, according to Gartner as well as IDC.

Both firms stated that among the top vendors mentioned above, HP, Dell and Apple registered year-over-year growth in PC shipments, while Asus and Acer marked declines. The firms have different opinion on Lenovo as Gartner states that it registered a decline, while its shipment remained flat year over year, as per IDC.

Talking about only the U.S. market, it is only HP which has witnessed increase in PC shipments as well as improvement in market share. Per Gartner, this was the fourth consecutive quarter of year-over-year shipment growth for the company in the U.S. market.

Moreover, the quarter marked the seventh consecutive quarter of overall shipment growth for HP. We believe the spin-off from Hewlett Packard Enterprise Company, and restructuring initiatives, such as focus on product innovations, pricing, marketing and sales activities, divestment of non-core assets, and cutting jobs to lower costs, are apparently paying off at last.

Region-Wise Performance

Talking about the geographical performance, the firms have a slightly different opinion. Per Gartner, Asia/Pacific, Japan and Latin America registered improvement in PC shipments, while the EMEA region slightly declined. However, the U.S. market witnessed a steep decline as consumers were seen preferring new “popular products, such as voice-enabled speakers, and newly released smartphones” over PCs during the holiday season, per Kitagawa.

On the other hand, per IDC, except the United States, all three regions — EMEA, APeJ and Japan — reported growth in the quarter.

However, the major thing highlighted by the firms was PC shipment growth in China, mainly driven by the huge success of Single Day promotion and strong demand for commercial PCs. According to Gartner, PC shipment in the country inched up 1.1% in the fourth quarter.

What’s Ahead?

Although the overall PC market is still very challenging, the forward-looking statements of the research firms indicate that the PC industry is moving toward stabilization. Jay Chou, IDC research manager, noted in a statement that “The fourth quarter results showed some potentially encouraging headway against the difficult environment in retail and consumer PCs.”

Both firms agreed that consumers now look for more advanced and quality devices rather than low-priced PCs. Kitagawa of Gartner said that "the PC will become a more specialized, purpose-driven device.”

IDC’s Chou has more or less similar views as he mentioned that "Enticed by a growing array of products that promise all-day battery life, high portability, and address emerging use cases that require more compute power, pockets of the consumer base are taking a serious look at these revamped PCs.”

The aforementioned positive comments on the PC market by the two industry experts will provide a respite to the PC vendors, as well as the companies which are dependent on the PC industry.

An improving trend in PC shipments will benefit the business prospects of companies like HP Inc., Microsoft, Intel Corporation, Seagate Technologies and Western Digital, which continue to depend substantially on PC sales.

Currently, Western Digital sports a Zacks Rank #1 (Strong Buy), while Seagate carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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