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PC Shipments Fall in Q1 on Coronavirus-Led Supply-Chain Woes

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The worldwide PC shipments fell 8% year over year in the first quarter of 2020, according to the data compiled by research firm Canalys. The percentage year-over-year decline marked the highest quarterly drop since 2016. Per the research firm’s preliminary data, PC vendors shipped 53.7 million desktops, notebooks and workstations during the quarter compared with the 58.3 million units sold in the year-ago quarter.

Canalys noted in its report that PC shipments fell despite a demand surge in the March-end quarter due to the shift toward the work-and-learn from home trend amid coronavirus-led global lockdown. Rushabh Joshi, Research Director at Canalys said, “The PC industry has been boosted by the global COVID-19 lockdown, with products flying off the shelves throughout Q1.”

However, lockdown measures to contain the spread of coronavirus have caused massive delays in productions as well as created logistic issues, resulting in a fall in global PC shipments. Joshi highlighted that factories in China couldn’t reopen after the Lunar New Year holidays as the government imposed restrictions on public movement to fight against coronavirus.

Additionally, the constrained supply of Intel INTC processors disrupted the industry supply chain. Joshi noted that delays in supply of Intel processors were “caused by a botched transition to 10nm nodes.”

How Did Top Vendors Fare?

Per the data compiled by Canalys, all top PC manufacturers witnessed year-over-year declines in PC shipments, except Dell Technologies DELL, which reported a 1.1% improvement. Among the five major vendors, Apple AAPL registered the steepest decline, with its shipment sliding 21% year on year.

According to Canalys, Lenovo LNVGY holds the top vendor position, with a market share of 23.9%, followed by HP’s HPQ 21.8% and Dell’s 19.6%. While Apple holds the fourth spot with a market share of 6%, Acer was at the fifth position, with a market share of 5.8%.  Lenovo, HP and Acer reported a PC shipment decline of 4.4%, 13.8%, and 12.6%, respectively.

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What Lies Ahead?

Canalys does not expect the spike in PC demand during the January-March period to sustain throughout the rest of the year. The research firm highlighted that the coronavirus outbreak has triggered a global recession, which will compel governments and organizations to curtail their spending on technology. Canalys predicts a significant plunge in PC demand during the second quarter.

Nonetheless, Canalys pointed out that the supply constraint in China has eased as factories have reopened in the country and are virtually running in full capacity. Therefore, PC vendors might face challenges in managing “supply chain and production correctly over the next three to six months.”

Currently, while HP carries a Zacks Rank #2 (Buy), Lenovo, Apple, and Intel have a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dell carries a Zacks Rank #5 (Strong Sell), at present.

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