The woes of the PC industry are well known, and the situation isn’t getting any better. The research firm IDC has shown a 13.9% drop in global PC sales to 76.3 million units in the first quarter of 2013, almost twice as big as the estimated decline of 7.7%.
Despite the fall in the PC industry, the Chinese smartphone and computer manufacturer Lenovo has continued to rise and is the only vendor among the world’s top 5 leading firms in this industry that has managed to avoid this global downfall. The company has been closing the gap between itself and the world’s biggest computer maker Hewlett-Packard Company (NYSE:HPQ), which is still on top with 15.7% of market share in the PC industry despite having fallen from 17.7% a year ago. In contrast, Lenovo has raised its market share to 15.3%. Dell Inc. (NASDAQ:DELL) comes in at third place with an 11.8% market share.
Hewlett-Packard Company (NYSE:HPQ) has recently reported its quarterly results for the three months ending April 30, 2013. Its revenues dropped by 10.1% to $27.6 billion, while income fell 32.4% to $1.08 billion or $0.55 per share. This translated into adjusted earnings of $0.87 per share, which was above the analysts’ estimate of $0.81 per share. However, the company’s top-line revenues were below the market’s expectations of $28.12 billion.
The falling sales came on the back of weak PC demand, but due to effective cost cutting and debt reduction, the company was able to beat the earnings estimates.
Hewlett-Packard Company (NYSE:HPQ)’s notebook and PC shipments dropped by 24% and 18%, respectively, from the comparable quarter last year. During the quarter, HP successfully cut down its total expenses and costs by 9% to $25.6 billion.
In the previous quarter, Hewlett-Packard Company (NYSE:HPQ) saw an across-the-board decline in sales, with two exceptions where it witnessed a modest increase.
1. In the Printing segment, sales of printing supplies rose 2% to $4.12 billion
2. In the Enterprise Group, networking equipment sales rose 1% to $618 million.
Overall, however, revenues in Enterprise Group fell by 11% as the sales of Industry Standard Server products dropped by 12% to $2.8 billion due to price competition from Dell Inc. (NASDAQ:DELL).
| Businesses | 2012(In Million) | 2013(In Million) | % Change |
|---|---|---|---|
| Personal Systems | $9,470 | $7,584 | -24.9% |
| Printing | $6,132 | $6,081 | -0.8% |
| Enterprise Group | $7,546 | $6,819 | -10.7% |
| Enterprise Services | $6,489 | $5,999 | -8.2% |
| Software | $970 | $941 | -3.1% |
| HP Financial Services | $968 | $881 | -9.9% |
| Corporate Investments | $7 | $10 | 30.0% |
Lenovo increases revenues to record highs
Lenovo also announced its earnings earlier for the fourth quarter ending March 31, 2013, and they seem to defy the gloom surrounding the PC industry. The company’s revenues increased by 4.5% to a record level of $7.83 billion while its income increased by an impressive 89.6% to $127 million. This growth in earnings was credited to better control costs, an increase in shipments, favorable pricing and the company’s mobile division.
I believe that the increase in sales was particularly impressive because the revenues from laptop and desktop, which forms more than 80% of the group’s total sales, have actually fallen. The growth in PC shipments is modest at best, but it is considerably better than the industry trends. The group’s mobile segment has pulled off another stellar performance.
Sales in Lenovo’s laptop business, which contributes around 53% of Lenovo’s revenues, decreased 2% year-over-year to $4.2 billion while Lenovo’s shipments increased by 0.4% as opposed to industry’s decline of 14.2%. Desktop PC sales, which account for 30% of total sales, declined 2% year-over-year to $2.4 billion in the first quarter while desktop shipments were flat as opposed to industry’s decline of 12.2%. In China, Lenovo now enjoys an enormous PC market share of 34.6% and shows a year-over-year increase of 2.6 percentage points.
In Lenovo’s Mobile Internet Digital Home (MIDH) division, sales rose by 74% to $736 million. Here, the smartphone shipment grew by a massive 206% in the quarter as compared to last year, putting Lenovo far ahead of China’s comparable smartphone market growth of 117%. As a result, the company ended up increasing its market share by 3.5 share points year-over-year to 13%.
