PC Shipments Witness Solid Growth in Q2 Per Gartner, IDC

After prolonged sluggishness, PC shipments reported solid growth in second-quarter 2018, according to latest data from two independent research firms — Gartner and International Data Corporation (“IDC”)

As expected, the firms provided different figures, which is mainly due to different techniques used for tracking PC sales as well as the inclusion and/or exclusion of certain products.

For example, IDC includes Chromebooks, which run on Alphabet Inc.’s GOOGL Chrome operating system, while Gartner takes into account Microsoft MSFT tablets and "detachables" such as the iPad Pro and the Asus Transformer.

Top Vendors

Preliminary data released by Gartner displayed that PC shipments in the second quarter were up 1.4% year over year to 62.1 million units. The IDC report stated that PC shipments increased 2.7% from the year-ago period to approximately 62.3 million units, surpassing its expectation of 0.3% increase.

Gartner called it “the first quarter of year-over-year global PC shipment growth since the first quarter of 2012.” IDC echoed the same sentiment saying that PC shipment “marks the strongest year-on-year growth rate in more than six years.”

Both the firms believe that the improved PC shipment results were mainly driven by higher demand in business markets due to migration to Windows 10.

However, per the data compiled by Gartner, weak demand for consumer PCs remained an overhang. Shift in consumer behavior from using PCs to smartphones for regular work continues to impact PC’s market growth. IDC stated that despite the shift to mobility, desktop market contributed positively to the results.

Per Gartner, Lenovo and Hewlett-Packard HPQ held the leading position with 21.9% market share each, followed by Dell, Apple AAPL and Acer with 16.8%, 7.1% and 6.4% share, respectively.

According to IDC, HP was the clear winner with 23.9% market share. Lenovo and Dell held the second and third position with respective market share of 22.1% and 18.1%. While Apple held the fourth position with 6.9% share, Acer occupied the fifth spot with 6.7% share.

Computer - Mini computers Industry 5YR % Return

Computer - Mini computers Industry 5YR % Return

Region-Wise Performance

United States showed year-over-year improvement per both the research firms. Per Gartner, U.S. PC shipments of 14.5 million rose 1.7% year over year, returning to growth after six straight disappointing quarters of decline.

Per IDC, the United States recorded the second consecutive year-over-year improvement in PC shipments to 17.3 million units. The upside was attributed to increase in desktop sales backed by rising commercial purchases and growing demand for gaming systems.

Gartner estimated that PC shipments rose 1.3% to 17.4 million units in Europe, the Middle East and Africa (EMEA). Increasing consumer demand in Russia, Ukraine and Kazakhstan backed results. Strong demand for business PCs in Germany and the United Kingdom was also a tailwind. IDC notes that the modest growth of PC market in EMEA was led by renewals in the commercial space.

Per Gartner, the Asia Pacific region’s PC shipment totaled 21.3 million units, showing 0.1% year-over-year increase. However, the China market remained a concern. Gartner states that unit shipments declined 3.6% from the year-ago period, given the saturation in consumer market and the deferred business procurements.

IDC noted that positive demand from India drove Asia/Pacific (excluding Japan) (APeJ) region. Philippines also recorded good shipments owing to the project by the Department of Education.  The firm stated that China’s PC market exceeded expectations on the back of higher consumer notebooks sale. However, weak demand from SMBs and public sector impacted shipments in the commercial segment.

In Japan, the PC industry continued to display strength backed by desktop and notebooks, according to IDC.

Bottom Line

The positive comments on the PC market by the two industry experts will provide a respite to not just PC vendors, but also the companies dependent on the industry.

An improving trend in PC shipments benefits the business prospects of companies like HP Inc., Microsoft, Intel INTC, Seagate Technologies STX and Western Digital WDC, which continue to depend substantially on PC sales.

However, a note of caution is evident from Gartner as the firm chose not to “declare a PC industry recovery” owing to the unstable market environment. Moreover, with the passage of Microsoft’s Window’s 10 replacement cycle, the demand from the business circle is anticipated to weaken, which poses a concern for these companies.

Currently, HP and Apple both carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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