Enthusiasm for the personal computer sector, sparked by renewed leadership from Microsoft, is waning. Microsoft (MSFT) Windows 8 for computers will be launched alongside Windows Phone 8 for mobile on October 26 2012, both of which could not come any sooner. Shipments for personal computers declined 8.3% in the third quarter, according to Gartner. Sales were not strong during the back-to-school session.
PC shipments dropped worldwide. Year-over-year, the decline was broken down in the table below. To highlight:
- USA: -13.8%
- Asia Pacific: -5.6%
- EMEA: -8.7%
Advanced Micro Devices (AMD) fared the worst. The company has more severe problems than the industry. AMD warned markets that its quarterly revenue would fall 10% (quarter-over-quarter). AMD previously expected revenue to be a decline of 4% and up to a gain of 2%.
Sales for Windows 8 will not be accounted for as the companies report earnings. In the short-term, investors should be bracing for earnings to be tepid. Intel already lowered expectations by reducing its revenue forecast.
Investors will conclude that the PC market is on the decline. In reality, companies not innovating their product to be appealing to consumers are experiencing the most severe decline. Lenovo was able to grow shipments by 9.8%. ASUS also grew by 11.8%.
Microsoft’s Windows 8 release continues to be important for the PC industry. Microsoft Surface provides a reference design that will guide manufacturers in the right direction. The release will not mean shares in this sector will rise immediately: growth for PCs is a long-term story. Manufacturers adapting their product to function as both a desktop, mobile laptop, and portable tablet will find customers.
A summary of the companies mentioned is provided below. Click on the company icon for further information:
1. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $246.18B, most recent closing price at $29.20.
2. Dell Inc. (DELL, Earnings, Analysts, Financials): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $16.81B, most recent closing price at $9.69.
3. 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 at $28.33B, most recent closing price at $14.41.
4. Advanced Micro Devices, Inc. (AMD, Earnings, Analysts, Financials): Operates as a semiconductor company in the United States, Japan, China, and Europe. Market cap at $1.94B, most recent closing price at $2.74.
5. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $107.46B, most recent closing price at $21.48.
Further Reading: The impact of Apple’s (AAPL) iPad Mini on PC Sales
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