As per the latest report from IDC, PC shipments will contract 6.1% in 2014, the third consecutive year of decline. The expected rate of decline is steeper than the research firm’s earlier forecast of a 3.8% decline in 2014. In fact, IDC now expects the decline in the PC market to continue through 2018. The weakening in global PC shipments is largely due to a shift in consumer preference toward tablets and mobile devices, as well as economic concerns in emerging markets.
The research firm also stated that PC shipments declined 9.8% to 315.1 million units in 2013, largely because of an 11.3% decline in emerging markets to 182.1 million units. The annual rate of decline was narrower than the research firm’s earlier forecast of a 10.1% decline.
We note that in January, IDC had predicted less than 1.0% increase in PC shipments in 2015, aided by system refreshes and enterprise system migrations beyond Microsoft's (MSFT) XP operating system. However it now appears that these tailwinds will be offset by the above-mentioned factors.
What’s worse, IDC anticipates the slump to worsen in Asia, which has for some time supported growth. The report also states that the widespread availability of economical Android-based tablets in emerging markets coupled with macroeconomic weakness and political turmoil compressed PC sales. According to IDC, smartphone shipments will increase 19.0% in 2014.
IDC also predicted that PC shipments growth on a continuing basis will be less than zero and that shipments will likely decline 0.2% in 2018.
We believe that the continuous decline in PC shipments raises a question regarding the future of the industry. The decline will badly hurt the business prospects of companies relying substantially on the sale of PCs such as Hewlett-Packard Company (HPQ) and Lenovo. This apart, the allied industries such as IT security service provider Symantec Corp. (SYMC) and chip maker Intel (INTC) may also feel the heat due to declining PC sales. The ability to innovate and migrate to mobile platforms and/or data centers may be the only possible solution for these players.
Currently, Microsoft, Symantec Corp. and Intel all carry a Zacks Rank #3 (Hold) whereas Hewlett-Packard carries a Zacks Rank #2 (Buy).
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