Gartner & IDC Q1 PC Shipment Data Paint Different Pictures

Data compiled by independent research firms — Gartner Inc. IT and International Data Corporation (“IDC”) – shows mixed results for PC shipments in first-quarter 2018. The figures as well as opinions of the two research firms are widely different.

The preliminary data released by Gartner depicts that PC shipment in the quarter shrunk 1.4% year over year to 61.7 million units. This also marks the 14th straight quarter of year-over-year fall — the longest duration of decline in the PC industry’s history.

Gartner noted that sluggish shipment in the Asia/Pacific region, particularly in China, resulted in the decline. Per Mikako Kitagawa, principal analyst at Gartner, “Some state-owned and large enterprises postponed new purchases or upgrades, awaiting new policies and officials’ reassignments after the session of the National People’s Congress in early March” resulting in a lackluster demand across China’s business market.

This apart, Kitagawa also mentioned that vendors have been waiting for Intel’s INTC new eighth generation core processors, thus, taking a cautious approach toward overstocking. Also, some inventory carryover from fourth-quarter 2017 impacted first-quarter 2018 shipment.

Nevertheless, IDC has a different view. Per the research firm, the PC market continued to display a stabilizing trend, with shipment remaining flat at 60.4 million units during the quarter as compared with the year-ago quarter.

The results indicate that PC vendors have been benefiting from continued upgrades to Windows 10 systems by business community and elevated demand for premium notebooks from consumer as well as commercial segments, per the research firm.

We believe the disparity in data and comments might be due to the different techniques used by the firms for tracking PC sales, as well as the inclusion and/or exclusion of certain products, specially Chromebooks, which run on Alphabet Inc.’s GOOGL Chrome operating system.

Notably, unlike Gartner, IDC includes Chromebooks. Gartner, on the other hand, takes into account Microsoft Corporation MSFT tablets and detachable, such as the iPad Pro and the Asus Transformer.

Different Takes on Component Prices

The firms have different take on component prices. Per Gartner, material prices are still rising as “component companies remain cautious about expanding their production capabilities” due to softness in the smartphone market and prevailing uncertainty in the PC market.

This has resulted in escalated average selling prices (ASPs) of PCs. Kitagawa further noted, "With fewer people buying new machines, manufacturers need to get the highest profit margin from each sale. To do that, they are raising the selling points and focusing on customer experience or perception of value."

On the contrary, per IDC, pricing has eased as component supply has improved from the first-quarter 2017 level.

Computer - Peripheral Equipment Industry 5YR % Return

Computer - Peripheral Equipment Industry 5YR % Return

Region-Wise Performance

Talking about the geographical performance, the firms have a slightly different opinion. Per Gartner, Asia/Pacific and the U.S. regions registered declines of 3.9% and 2.9%, respectively, while all other regions recorded marginal growth. As already discussed above, China chiefly gave rise to the dismal performance in the Asia/Pacific region, registering a 5.7% decline in unit shipment.

On the other hand, IDC noted modest growth in the United States, after six straight quarters of decline, while Japan retained its growth momentum for the seventh consecutive quarter. The Latin America region continues to show its recovery trend. However, like Gartner, IDC too stated that the Asia/Pacific (excluding Japan) (APeJ) region witnessed a soft performance.

Top Vendors List

Although both research firms’ data varies, the organizations have similar views when it comes to positioning the top three vendors. The firms agree that HP Inc. HPQ continues to be the market leader in this space, followed by Lenovo and Dell.

However, for the fourth and fifth spot, the firms’ opinions differ. Per Gartner, Apple AAPL holds the fourth position and Acer is placed at the fifth spot. On the other hand, IDC ranks Acer fourth and Apple in the fifth position.

Both firms agreed that Dell recorded strongest year-over-year growth in the first quarter. Moreover, per Gartner, Dell replaced HP in the United States, climbing up the ladder to the top spot.

What’s Ahead

Although the overall PC market is still plagued with challenges, we believe it is moving toward stabilization. According to Gartner’s report, shipment declined for the 14th consecutive quarter, but we note that the fall has moderated.

Furthermore, the forward-looking statement of IDC clears the scenario. Neha Mahajan, senior research analyst, Devices & Displays at IDC, stated that "A likely rise in commercial activity amidst a positive economic environment is expected to further strengthen demand. The retail platform too shows signs of stability especially with a fast-growing gaming community adding to the confidence."

An improving trend in PC shipment will benefit business prospects of companies like HP Inc., Intel, Seagate Technologies STX and Western Digital WDC, which continue to depend substantially on PC sales.

Of the firms discussed above, Western Digital sports a Zacks Rank #1 (Strong Buy), while HP Inc. and Seagate carry a Zacks Rank #2 (Buy). Intel has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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