PC Shipments Post the Steepest Decline Ever in a Single Quarter

According to IDC, Worldwide PC shipments totaled 76.3 million units in the first quarter of 2013 (1Q13), down -13.9% compared to the same quarter in 2012 and worse than the forecast decline of -7.7%, according to the International Data Corporation (IDC) Worldwide Quarterly PC Tracker. The extent of the year-on-year contraction marked the worst quarter since IDC began tracking the PC market quarterly in 1994. The results also marked the fourth consecutive quarter of year-on-year shipment declines.

Despite some mild improvement in the economic environment and some new PC models offering Windows 8, PC shipments were down significantly across all regions compared to a year ago. Fading Mini Notebook shipments have taken a big chunk out of the low-end market while tablets and smartphones continue to divert consumer spending. PC industry efforts to offer touch capabilities and ultraslim systems have been hampered by traditional barriers of price and component supply, as well as a weak reception for Windows 8. The PC industry is struggling to identify innovations that differentiate PCs from other products and inspire consumers to buy, and instead is meeting significant resistance to changes perceived as cumbersome or costly.

Goldman Sachs analyst Heather Bellini has downgraded the company from Hold to Sell while predicting that its market share will “gradually deteriorate” unless it makes bold changes to turn itself around. Per Bloomberg, Bellini writes that Microsoft “faces critical secular challenges given the deteriorating PC demand backdrop” and that its market share will “gradually deteriorate unless Microsoft successfully repositions itself as a more meaningful participant in the new era of consumer compute” that includes tablets and smartphones. Bellini’s note is very similar to a note released Wednesday by BGC analyst Colin Gillis, who said that Microsoft’s “minimal participation” in the mobile market represented “an increasingly urgent problem that may prove difficult to reverse.”

“At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” said Bob O’Donnell, IDC Program Vice President, Clients and Displays. “While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.”

The impact of slow demand has been magnified by the restructuring and reorganizing efforts impacting HP and Dell. Lenovo remains a notable exception as it continues to execute on a solid “attack” strategy. Mid- and bottom-tier vendors are also struggling to identify growth markets within the U.S. Among the most vulnerable group of vendors are the whitebox system builders, which are undergoing consolidation that is affecting shipments as well as the distribution sector.

“Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome,” said David Daoud, IDC Research Director, Personal Computing. “The industry is going through a critical crossroads, and strategic choices will have to be made as to how to compete with the proliferation of alternative devices and remain relevant to the consumer. Vendors will have to revisit their organizational structures and go to market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation.”

Regional Highlights

United States – The U.S. market had another dismal quarter in 1Q13, contracting -12.7% year on year, with a drop of -18.3% compared to the fourth quarter of 2012. With total volume falling to 14.2 million, quarterly shipments reached their lowest level since the first quarter of 2006. With this latest figure, the U.S. is now in its tenth consecutive quarter of year-on-year contraction (excluding a brief moment of growth – less than 2% year on year – in 3Q11).

EMEA – As expected, Europe, Middle East and Africa (EMEA) remained constrained, posting a stronger double-digit decline than anticipated in the first quarter of 2013. Results fell short of expectations in the consumer segment as softness in demand persisted amid a continued shift to tablets and ongoing budget pressures. Meanwhile, the market response to Windows 8 and touch-enabled devices remained slow, leading to cautious sell-in from most vendors. Shipments in the commercial market remained constrained as predicted, following continued economic pressure and lack of major IT renewals.

Japan – PC shipments were in line with expectations in the first quarter. Some economic improvement is helping to support commercial replacement demand ahead of the scheduled end of support for Windows XP next year. However, consumer shipments remained very weak.

Asia/Pacific (excluding Japan) (APeJ) – PC shipments in APeJ declined sharply, dropping a record -12.7% year on year, the first time the region has experienced a double-digit decline. Although much of the earlier Windows 7 stock had cleared, a lukewarm reception toward Windows 8 hampered new shipments. China’s inactivity contributed heavily to the decline, as public sector spending continued to be constrained.

Vendor Highlights

HP remained the top vendor, but posted a substantial double-digit decline in shipments after an aggressive fourth quarter kept growth flat during the holidays. HP’s worldwide shipments fell more than -23% year on year in 1Q13, with significant declines across all regions, as internal restructuring continued to affect commercial sales. Although HP maintained its leadership position in the United States, the company saw U.S. shipments fall -22.9% from a year ago.

Lenovo remained second in global shipments and nearly closed the gap with HP. Lenovo continued to outpace the market, notably expanding shipments with its attack strategy. In the United States, Lenovo outperformed the market with double digit year-on-year growth compared to the market’s double-digit contraction. Shipments in Asia/Pacific declined, however, keeping Lenovo’s overall growth flat.
According to Businessweek, there are a couple of reasons for this: First, Lenovo has been targeting its sales toward emerging markets such as Brazil and its native China, where demand for new PCs is higher than in the United States, Europe, Japan and Korea.Businessweek also says that Lenovo “makes almost one-third of its products in house, which helps it innovate and get those innovations to the market more quickly” while also allowing it “to rely less on factories that are also making computers for its competitors.”

Dell saw shipments decline by more than -10% globally and -14% in the United States. The vendor continued to face tough competition and struggled with customer uncertainty about the direction of its restructuring. Nevertheless, the decline in shipments was smaller than the past few quarters, and its sales to Asia/Pacific returned to positive growth.

Acer Group continued to see substantial declines in shipments across regions. As the leader in Mini Notebook shipments, the vendor has been particularly exposed to the decline in these systems. Slow consumer and SMB growth has also taken a toll. In a sequential comparison, Acer’s market share rose slightly to 8.1% in 1Q12 from 8.0% in 4Q12, halting its market share decline.

ASUS managed some growth in the United States, but saw a substantial decline in EMEA and Asia/Pacific. The company’s substantial surge in Americas shipments in the second half of 2012 gave way to limited growth as demand weakened.

Apple fared better than the overall U.S. market, but still saw shipments decline as its own PCs also face competition from iPads.

Toshiba also saw shipments decline in the United States, but fared better than the overall market, benefitting somewhat from the restructuring of market leaders HP and Dell.

Top 5 Vendors, Worldwide PC Shipments, First Quarter 2013 (Preliminary) (Units Shipments are in thousands) 

Vendor

1Q13 Shipments

1Q13 Market Share

1Q12 Shipments

1Q12 Market Share

1Q13/1Q12 Growth

1. HP

11,997

15.7%

15,726

17.7%

-23.7%

2. Lenovo

11,700

15.3%

11,705

13.2%

0.0%

3. Dell

9,010

11.8%

10,110

11.4%

-10.9%

4. Acer Group

6,150

8.1%

8,952

10.1%

-31.3%

5. ASUS

4,363

5.7%

5,401

6.1%

-19.2%

Others

33,075

43.4%

36,739

41.5%

-10.0%

Total

76,294

100.0%

88,635

100.0%

-13.9%

Source: IDC Worldwide Quarterly PC Tracker, April 10, 2013

Table notes follow the last table.

 

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Top 5 Vendors, United States PC Shipments, First Quarter 2013 (Preliminary) (Units Shipments are in thousands) 

Vendor

1Q13 Shipments

1Q13 Market Share

1Q12 Shipments

1Q12 Market Share

1Q13/1Q12 Growth

1. HP

3,570

25.1%

4,632

28.5%

-22.9%

2. Dell

3,074

21.7%

3,590

22.1%

-14.4%

3. Apple

1,418

10.0%

1,533

9.4%

-7.5%

4. Toshiba

1,279

9.0%

1,349

8.3%

-5.2%

5. Lenovo

1,274

9.0%

1,127

6.9%

13.0%

Others

3,581

25.2%

4,022

24.7%

-11.0%

Total

14,197

100.0%

16,255

100.0%

-12.7%

Source: IDC Worldwide Quarterly PC Tracker, April 10, 2013

Table Notes:

  • Some IDC estimates prior to financial earnings reports.
  • Shipments include shipments to distribution channels or end users. OEM sales are counted under the vendor/brand under which they are sold.
  • PCs include Desktops, Portables, Mini Notebooks, and Workstations and do not include handhelds, x86 Servers and Tablets (i.e. iPad and Android-based Tablets with detachable keyboards). Data for all vendors are reported for calendar periods.

Source: IDC

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