Gartner’s View
Research firm Gartner Inc. (IT) lowered its worldwide personal computer (PC) growth expectations to 15.3% year over year in the second half of 2010, down 2 percentage points from its previous outlook.
Lower consumer demand for PCs in established or mature markets and caution at PC suppliers has led to a dramatic change in the PC supply chain. Gartner cited weak economic conditions in the U.S. and Western Europe as the reason for the softer PC shipment outlook.
According to Gartner, mini notebooks constituted less than 18.0% of the total mobile PC market in the second quarter of 2010, down from 20.0% of the total market at 2009-end. Gartner expects mini notebooks market share to drop to approximately 10.0% by 2014.
However, worldwide PC shipments are projected to total 367.8 million units for the full year 2010, up 19.2% from 308.3 million units in 2009. We think that this is due to easy comparison with 2009, which was impacted by the worldwide recession.
The recession prompted a delay in PC purchases by businesses in 2009. However, with a fulfillment of this pent-up demand and increased replacement rates by businesses, Gartner expects overall PC shipments for calendar year 2010 to remain strong.
IDC’s View
Research firm IDC also lowered its PC shipment forecast for 2010, owing to lower-than- expected second half 2010 shipments, hurt by waning employment conditions in the U.S. However, IDC expects some recovery in 2011.
IDC anticipates PC shipment growth of 11.8% in the second half of 2010. Weak second half growth led IDC to cut its full-year growth expectations to 17.0% from its previous expectation of a growth of 19.8%. IDC contends that 356.6 million PCs will be shipped in 2010 compared to 304.9 million in 2009.
IDC reduced its estimates for laptop and netbooks as emerging devices such as Apple Inc.'s (AAPL) iPad would cut into sales. IDC pointed out that although consumer PC growth would slow down, the business PC market would hold up well in 2010.
The U.S. market is expected to grow 10.0% to 78.4 million units in 2010, while growth outside the U.S. will be approximately 19.0% to 278.2 million units.
Our Take
The first half of 2010 witnessed pent up demand in the PC market, driven by PC upgrades (replacement of aging machines) due to much-improved hardware and the launch of Microsoft’s compelling Windows 7 operating system (late last year). The Windows 7 operating system has seen increased adoption on both desktop and mobile platforms.
However, consumer PC demand is slowing down and is expected to remain weak through the remainder of 2010 due to waning consumer confidence and increasing evidence of a jobless recovery. Consumers are still hesitant to spend, which will definitely hurt PC sales.
Intel Corp. (INTC), the largest PC chip maker, lowered its sales outlook due to softer-than-expected consumer demand, which indicated the weakening of the consumer market.
Although the year 2010 will witness some revival in PC shipments owing to a strong first half, we believe the recovery will not be as strong as previously expected.
Nonetheless, tablets will affect the PC market, particularly netbooks and notebooks. Apple Inc.’s iPad has cannibalized the growth in notebooks and netbooks, negatively impacting sales at Hewlett-Packard (HPQ), Acer and Dell Inc. (DELL), which relied considerably on their growth.
The lower-priced tablets from Dell (Streak tablet), Samsung (Galaxy Tab) and Toshiba (SmartPad tablet), as well as Android and Windows 7-based tablet devices that are expected to come out next year will slash the Netbook demand further, in our view.
Moreover, the netbooks that are expected to come out in the latter half of 2010 are higher-priced relative to 2009 (when they were often heavily discounted), which is also partially responsible for the slowdown in shipments. Although this could lead to higher revenues, unit shipments will be hurt.
PC growth in the second half of calendar 2010 will be much slower than previously expected. However, while it is apparent that the back-to-school season will be weaker than expected, fourth quarter sales could be pulled up by the holiday season.
Lastly, growth in developed markets is likely to be tempered by the ongoing drive to transfer computing operations to the cloud.
Consequently, the leaders in this space, Hewlett-Packard, Dell and Apple have a Zacks #3 Rank, a short-term Hold rating.
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GARTNER INC -A (IT): Free Stock Analysis Report
Zacks Investment Research
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Lower consumer demand for PCs in established or mature markets and caution at PC suppliers has led to a dramatic change in the PC supply chain. Gartner cited weak economic conditions in the U.S. and Western Europe as the reason for the softer PC shipment outlook.
According to Gartner, mini notebooks constituted less than 18.0% of the total mobile PC market in the second quarter of 2010, down from 20.0% of the total market at 2009-end. Gartner expects mini notebooks market share to drop to approximately 10.0% by 2014.
However, worldwide PC shipments are projected to total 367.8 million units for the full year 2010, up 19.2% from 308.3 million units in 2009. We think that this is due to easy comparison with 2009, which was impacted by the worldwide recession.
The recession prompted a delay in PC purchases by businesses in 2009. However, with a fulfillment of this pent-up demand and increased replacement rates by businesses, Gartner expects overall PC shipments for calendar year 2010 to remain strong.
IDC’s View
Research firm IDC also lowered its PC shipment forecast for 2010, owing to lower-than- expected second half 2010 shipments, hurt by waning employment conditions in the U.S. However, IDC expects some recovery in 2011.
IDC anticipates PC shipment growth of 11.8% in the second half of 2010. Weak second half growth led IDC to cut its full-year growth expectations to 17.0% from its previous expectation of a growth of 19.8%. IDC contends that 356.6 million PCs will be shipped in 2010 compared to 304.9 million in 2009.
IDC reduced its estimates for laptop and netbooks as emerging devices such as Apple Inc.'s (AAPL) iPad would cut into sales. IDC pointed out that although consumer PC growth would slow down, the business PC market would hold up well in 2010.
The U.S. market is expected to grow 10.0% to 78.4 million units in 2010, while growth outside the U.S. will be approximately 19.0% to 278.2 million units.
Our Take
The first half of 2010 witnessed pent up demand in the PC market, driven by PC upgrades (replacement of aging machines) due to much-improved hardware and the launch of Microsoft’s compelling Windows 7 operating system (late last year). The Windows 7 operating system has seen increased adoption on both desktop and mobile platforms.
However, consumer PC demand is slowing down and is expected to remain weak through the remainder of 2010 due to waning consumer confidence and increasing evidence of a jobless recovery. Consumers are still hesitant to spend, which will definitely hurt PC sales.
Intel Corp. (INTC), the largest PC chip maker, lowered its sales outlook due to softer-than-expected consumer demand, which indicated the weakening of the consumer market.
Although the year 2010 will witness some revival in PC shipments owing to a strong first half, we believe the recovery will not be as strong as previously expected.
Nonetheless, tablets will affect the PC market, particularly netbooks and notebooks. Apple Inc.’s iPad has cannibalized the growth in notebooks and netbooks, negatively impacting sales at Hewlett-Packard (HPQ), Acer and Dell Inc. (DELL), which relied considerably on their growth.
The lower-priced tablets from Dell (Streak tablet), Samsung (Galaxy Tab) and Toshiba (SmartPad tablet), as well as Android and Windows 7-based tablet devices that are expected to come out next year will slash the Netbook demand further, in our view.
Moreover, the netbooks that are expected to come out in the latter half of 2010 are higher-priced relative to 2009 (when they were often heavily discounted), which is also partially responsible for the slowdown in shipments. Although this could lead to higher revenues, unit shipments will be hurt.
PC growth in the second half of calendar 2010 will be much slower than previously expected. However, while it is apparent that the back-to-school season will be weaker than expected, fourth quarter sales could be pulled up by the holiday season.
Lastly, growth in developed markets is likely to be tempered by the ongoing drive to transfer computing operations to the cloud.
Consequently, the leaders in this space, Hewlett-Packard, Dell and Apple have a Zacks #3 Rank, a short-term Hold rating.
APPLE INC (AAPL): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
GARTNER INC -A (IT): Free Stock Analysis Report
Zacks Investment Research
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