PC Shipments Falling: Will the PC Industry Ever Rebound?

PC Shipments Falling: Will the PC Industry Ever Rebound?

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Microsoft (MSFT) says that flooding in Thailand will probably lower industry-wide sales of personal computers and may disappoint analyst projections for the fourth quarter.

Flooding in Thailand disrupted disk-drive factories which ultimately impacted PC production. The hiccup came at a fragile period for Microsoft: The company already faces stiff competition from tablets and smartphones.

"Windows is their most profitable business. If that's not stable for whatever reason — Thailand, Apple — it just becomes difficult for the stock to gain momentum," says Brendan Barnicle, an analyst at Pacific Crest Securities in an interview with Bloomberg.

Analysts estimate total PC shipments fell about 1% in the fourth quarter, and some expect it fell even more. The company has missed analyst targets for three of the past four quarters. Microsoft's announcement convinces analysts they will fall short again.

According to Bloomberg, analysts on average predict Microsoft's total sales in its second fiscal quarter ended in December will rise 5.3% to $21 billion.

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Microsoft may be hitting a rough spot, so which other companies are at risk?

As an example, Bloomberg reports Intel (INTC), the world's biggest computer-chip maker, cut its fourth-quarter revenue forecast by $1 billion last month, citing the disk-drive shortages.

Let's assess the industry's damage by looking at some of the major players involved with Microsoft. Do you think these companies will be dragged down this quarter?

Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for all the stocks mentioned below.

List sorted alphabetically.

 

1. Dell Inc. (DELL, Earnings, Analysts, Financials): Provides integrated technology solutions in the information technology industry worldwide. Market cap of $28.38B. The stock has had a couple of great days, gaining 5.19% over the last week.

 

2. Hewlett-Packard Company (HPQ, Earnings, Analysts, Financials): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap of $52.84B. The stock has gained 3.2% over the last year.

 

3. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap of $131.37B. Offers a good dividend, and appears to have good liquidity to back it up–dividend yield at 3.26%, current ratio at 2.24, and quick ratio at 1.91. The stock has gained 13.21% over the last year.

 

4. Marvell Technology Group Ltd. (MRVL, Earnings, Analysts, Financials): Designs, develops, and markets analog, mixed-signal, digital signal processing, and embedded and standalone ARM-based microprocessor integrated circuits. Market cap of $8.91B. Might be undervalued at current levels, with a PEG ratio at 0.8, and P/FCF ratio at 10.56. The stock has had a couple of great days, gaining 7.61% over the last week.

 

5. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap of $233.19B. The stock has gained 3.43% over the last year.

 

6. NVIDIA Corporation (NVDA, Earnings, Analysts, Financials): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap of $8.67B. The stock has lost 2.94% over the last year.

 

7. Seagate Technology PLC (STX, Earnings, Analysts, Financials): Designs, manufactures, markets, and sells hard disk drives for the enterprise, client compute, and client non-compute market applications in the United States and internationally. Market cap of $7.85B. This is a risky stock that is significantly more volatile than the overall market (beta = 2.18). Offers a good dividend, and appears to have good liquidity to back it up–dividend yield at 3.85%, current ratio at 1.97, and quick ratio at 1.7. Exhibiting strong upside momentum–currently trading 14.21% above its SMA20, 12.67% above its SMA50, and 27.9% above its SMA200. The stock has had a couple of great days, gaining 11.12% over the last week.

 

8. Western Digital Corp. (WDC, Earnings, Analysts, Financials): Engages in the design, development, manufacture, and sale of hard drives worldwide. Market cap of $7.80B. The stock has had a couple of great days, gaining 6.58% over the last week.

 

 

(List compiled by Eben Esterhuizen, CFA)

 

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One Response to “PC Shipments Falling: Will the PC Industry Ever Rebound?”

  1. Reggie says:

    The question is “What is the PC industry?” If you look at a PC it is component based with many different manufacturers supplying parts and software. Many of the supplier and many integrators are not PC only. They have branched out to other areas that are currently experiencing rapid growth such as Smartphones and Tablet computers. Those companies that have not sought flexibility in providing product will get left behind.

    All of the companies listed above are flexible and have diversified. Some more than others. For example, NVIDIA has moved rapidly and is a leader in smartphone and tablet processors. Additionally, NVIDIA continues to branch out to new areas such as with Audi to run the systems for navigation, multimedia, and stereo for their cars.

    Overall, the PC is just one form factor in the computing industry. Those who are smart will integrate with the latest computing platforms.

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