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MarketWatch First Take: The PC boom and bust is already ‘one for the record books,’ and it isn’t over

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The end of the biggest boom the personal-computer industry has ever seen is ugly, and its isn’t over.

The holiday season saw what is believed to be the biggest year-over-year decline in PC shipments in history, according to reports from two market-research firms that cover the industry, after they dove harder than the record-level decline the quarter before. IDC recorded PC shipments falling 28.1% to 67.2 million units, while Gartner reported that PC units fell 28.5% in the fourth quarter to 65.3 million.

“There’s no question when we look back at this time that the rise and fall of the PC market will be one for the record books,” IDC analyst Ryan Reith said in a statement.

He added that “plenty of opportunity still lies ahead,” and that the market has plenty of potential to recover. Don’t expect that in the immediate future, though.

“We believe PC inventories continue to remain high, with potential overhang in [first half] 2023, and we model declines for the next few quarters, with muted recovery in the near term as recession woes delay commercial upgrade cycle,” Jim Suva, a Citigroup analyst, wrote in a note Wednesday.

Suva said that the holiday decline was worse than he thought, as he had been modeling a 22% decline. In the end, every manufacturer except for Apple Inc.
AAPL,
+2.11%

easily exceeded that drop.

The news: The PC industry just suffered its worst decline on record, again

The three companies with the biggest market share worldwide, Lenovo Group Ltd.,
992,
-1.09%
,
HP Inc.
HPQ,
-0.89%

and Dell Technologies Inc.
DELL,
-4.05%

all saw unit shipments tumble more than 28%. Lenovo units fell 28.5 %, HP saw units drop 29% while Dell saw the sharpest dropoff, 37.2%, according to both IDC and Gartner. The firms disagreed on Apple’s performance, with IDC stating Apple’s units fell 2.7% and Gartner saying 10.2%.

IDC has been more right on Apple than Gartner in recent quarters, and Apple’s performance suggests — as in most discussions about tech companies and stocks for the past few years — that betting on Tim Cook will be a strong course of action this year. But the news isn’t as good for the rest of the PC industry.

Those companies were celebrating earlier in the COVID-19 pandemic, as companies bought new devices to send to workers stuck at home and families purchased new computers for students learning at home. The PC industry saw a sales growth boom unlike any other in its history, but it ended almost as quickly as it began.

Read more from Therese about the pandemic PC boom and its legacy

Higher PC inventory levels started building in the first half of 2022 and became a bottleneck for the market. Low PC supply caused by high demand and supply-chain disruptions through 2021 quickly turned into an excess of supply once demand quickly and significantly slowed. That dynamic may take longer to turn around.

But it is worth pointing out that the total unit volume for 2022 of 292.3 million, according to IDC, and 286.2 million, according to Gartner, still outpaced shipment levels before the pandemic. In 2019, for example, PC shipments came in at 268 million, according to IDC.

Whichever dataset investors read, they were clearly not ready for some of the declines, especially at Dell, which saw its shares tumble 4% on Wednesday. HP fell 0.9%, and Apple was up 2%. Lenovo’s shares fell 1% on Wednesday but had not yet opened for Thursday’s trading yet in Hong Kong.

The PC business had a nice ride while it lasted, but now — along with the rest of tech — it is going to be hunkering down and looking for ways to restart its growth trajectory. Don’t expect that to happen in the first six months of this year, and likely not until 2024.

: Bed Bath & Beyond might be teetering. But its stock just had its biggest percentage gain ever.

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