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Thursday, October 11, 2012
PC Market Struggles, Lenovo Nearly Catches HP


The worldwide PC market contracted sharply in the third quarter of 2012 and Lenovo Group Ltd is approaching Hewlett-Packard to become the world's No. 1 PC maker, according to data released by research house Gartner on Wednesday.

Third quarter shipments declining 8.6% from the third quarter of 2011, according to IDC.

Gartner confirmed IDC's findings. The firm reported a decline of 8.3 percent in PC shipments compared with the third quarter of 2011.

IDC had expected a quiet quarter as channels focused on clearing out Windows 7 inventory to make space for Windows 8. Continued pressure from other products such as tablets and smartphones, as well as uncertainty over the impact of Windows 8 and the economic outlook, contributed to depressed shipments.

Nevertheless, the results show the vulnerability of PCs and the loss of mindshare among buyers who until recent years have flocked to back-to-school promotions in the third quarter for PCs.

"PCs are going through a severe slump," said Jay Chou, senior research analyst, Worldwide PC Tracker. "The industry had already weathered a rough second quarter, and now the third quarter was even worse. A weak global economy as well as questions about PC market saturation and delayed replacement cycles are certainly a factor, but the hard question of what is the 'it' product for PCs remain unanswered. While ultrabook prices have come down a little, there are still some significant challenges that will greet Windows 8 in the coming quarter."

"We expected a weak PC market in the lead up to Windows 8 release in the fourth quarter. While the industry has been focused on shaving excess inventory and preparing to launch a new generation of products, consumers have been looking at alternative devices like tablets. In addition, businesses have slowed their refresh cycle as they remain concerned about the broad economic outlook, amid a busy political season," said David Daoud, research director, Personal Computing at IDC. "Nevertheless, as vendors line up innovative new products and designs, consumers are likely to respond positively during the tail-end of 4Q12, and that means a potential return to positive growth at the end of this year."

The U.S. market came in slightly weaker than an already negative forecast, contracting 12.4% compared to a forecast of ?9.5%. This reflected weaker consumer demand, including a weak back-to-school season, and an industry-wide inventory clean up. The consumer segment was particularly affected as buyers focused on competing products. However, IDC believes that the fundamentals for some recovery exist. With the launch of Windows 8 in 4Q12, IDC expects shipment growth to return to mid-single digits in the fourth quarter and into next year.

HP saw shipments contract more than 16% from a year ago and narrowly held on to the top vendor spot. IDC said that distractions caused by its reorganization, challenges in integrating its enterprise acquisitions, and an unclear strategy to regain its course remain key obstacles.

Lenovo, despite slowing growth in Asia, continued to register the highest yearly growth among all top vendors. The vendor maintained its methodical approach to build out channel partnerships and acquire key OEMs in markets outside it home turf, with varying degrees of success. Its persistence as well as missteps of its rivals helped Lenovo to maintain a top 5 position in the U.S., and gain a couple points of share to nearly tie HP for the lead in global shipments.

Gartner's report was even more optimistic for Lenovo. The firm reported that Lenovo actually took the No. 1 position in worldwide PC shipments for the first time, as its share increased to 15.7 percent, while HP's global PC share was at 15.5 percent.

Responding to IDC's report, HP issued the following statement:

"While there are a variety of PC share reports in the market, some don't measure the market in its entirety. The IDC analysis includes the very important workstation segment and therefore is more comprehensive. In that IDC report, HP occupies the No. 1 position in PCs."

According to IDC, Dell faced a tough quarter, dropping below its own 2Q12 shipment volume. The vendor saw share declines in all markets and ended the quarter with a 14% decline. Tepid PC refresh activity in the U.S. and EMEA continued to be a key inhibitor for Dell. Although the company has made strides in other areas, with Asia/Pacific becoming its second biggest market after the U.S., its momentum there has also been curtailed by a cooling market.

Gartner's corresponding report also ranks Dell as the No. 3 vendor in PC shipments worldwide in the third quarter of 2012, with the company's shipments to see a 13.4% decline.

Acer Group has faced an uphill climb to get back into growth mode since the market for low-priced notebooks dimmed. The third quarter was no different, with shipments registering a sequential decline and disappointing notebook volume. However, Acer's aggressive foray into ultrabooks and Windows tablets could help to reverse its fortunes if Windows 8 finds solid acceptance.

Analysts at IHS expect the total PC market in 2012 to contract by 1.2 percent to 348.7 million units, down from 352.8 million in 2011.

"There was great hope through the first half that 2012 would prove to be a rebound year for the PC market," said Craig Stice, senior principal analyst for computer systems at IHS. "Now three quarters through the year, the usual boost from the back-to-school season appears to be a bust, and both AMD and Intel's third-quarter outlooks appear to be flat to down. Optimism has vanished and turned to doubt, and the industry is now training its sights on 2013 to deliver the hoped-for rebound. All this is setting the PC market up for its first annual decline since the dot-com bust year of 2001."


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