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PC Shipments Soften in Q1: LNVGY, HPQ, DELL & AAPL in View

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The PC Market persisted to be sluggish in first-quarter 2019 after a dull phase over the last few quarters. Furthermore, this is evident from the recently released worldwide PC shipment data by Gartner Inc. and International Data Corporation (IDC).

Per Gartner’s preliminary data, PC shipments in the first quarter fell 4.6% year over year to 58.5 million units. Going by the IDC report, shipment dipped 3% on a year-over-year basis and totaled 58.5 million in the period under review.

Notably, Intel’s (INTC - Free Report) CPU shortages coupled with soft consumer demand remained an overhang on the PC shipments. Although consumers are rapidly retiring their PCs, replacement seems to have taken a backseat, inducing a fall in PC shipments.

Is Hope on the Horizon?

The PC market is currently banking on demand created in the commercial market owing to the transition to Microsoft’s Windows 10.

Moreover, Intel’s supply constraint has reportedly pushed leading PC vendors toward Advanced Micro Devices (AMD - Free Report) , which helped expand the year-over-year shipment volumes and gain a substantial market share from small vendors.

In this regard, Gartner adds that the shift in focus of the top three vendors, namely HP (HPQ - Free Report) , Lenovo (LNVGY - Free Report) and Dell (DELL - Free Report) , toward high-end products has also been a positive. The companies are also likely to boost profit margins owing to this strategy.

Moreover, the strong requirement for Chromebooks is a tailwind for vendors like Acer, whose primary focus is on gaming and Chrome.

However, with the passage of Window’s 10 replacement cycle in 2020, the demand from the business circle is anticipated to weaken, which raises a concern.

According to Gartner, PC shipments are likely to witness a 0.6% year-over-year decline to 258 million units in 2019.

Computer - Mini computers Industry 5YR % Return

Computer - Mini computers Industry 5YR % Return

How Are the Vendors Poised?

Lenovo has been benefiting immensely from its joint venture with Fujitsu. The company may have slipped into the second place in the reported quarter, per IDC, but its shipments have increased consistently. According to Gartner, Lenovo is still leading the PC market.

Fujitsu’s strong presence in EMEA and Japan is also helping Lenovo expand across those regions.

HP, despite witnessing a year-over-year dip of 0.8%, has regained its top position with 23.2% market share, per IDC. Meanwhile, Gartner puts HP in the second spot with 21.9% market share and a year-over-year growth rate of 0.8%.

HP’s focus on product innovation & differentiation, pricing plus marketing and sales activities will trigger demand for its PC and Printing products in the market.

Dell Technologies, which held the third place, recorded the fifth consecutive quarter of PC shipment growth in the first quarter. Its 17.6% market share in the period under consideration grew year over year, up from 16% in the year-ago quarter, per Gartner.

Notably, the company is profiting massively from the uptrend in commercial notebooks and workstations that increased in double digits in the last reported quarter, leading to a 9% rise in the commercial revenues in turn. However, the company’s change in focus toward high-end notebooks and gaming, given the supply chain dynamics, remained a drag on consumer revenues.

Coming to Apple (AAPL - Free Report) , IDC announced that the company witnessed a slip of nearly 0.5% due to hardware issues that adversely impacted the sales of its notebooks. Per Gartner, Apple's Mac sales were down 2.5%. However, according to both firms, Apple has perked up its market share on a year-over-year basis and continues to hold the fourth slot among the top PC vendors.

Last month, the company confirmed that a few MacBook third-generation users are facing problems with its butterfly keyboard. Nonetheless, Apple recently enhanced its iMac line-up, which is expected to deliver a superior performance in terms of computing and graphics.

Zacks Rank

While Lenovo sportsa Zacks Rank #1 (Strong Buy), Apple has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dell and HP carry a Zacks Ranks 4 (Sell).

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