The second quarter's marketwide earnings are going to be rough -- that's not in dispute. The only question is: How bad? Whereas only the final month of the first quarter of 2020 was crimped by coronavirus lockdowns in the United States, the entire three-month stretch we just wrapped up has been mired by the pandemic.
The outbreak has proven particularly problematic for the United States tech industry, including big-name companies like HP (HPQ 0.42%) and Apple (AAPL -1.59%). Lockdown measures in China late last year not only cut consumers' access to consumer-tech goods like the Apple iPhone, getting technological components and goods out of China was also a struggle.
As CEO Tim Cook noted in April of the quarter ending in March: "In the next [middle] five weeks of the quarter, as COVID-19 started impacting China, iPhone supply was temporarily affected, as well as demand for our products within China." Apple's iPhone revenue for that accounting period went on to fall 7% year over year. The company's total product sales were off by a little more than 3%. Apple's unwillingness to offer guidance for the quarter ending in June didn't suggest those results would be any better.
Things may not be as disastrous for the technology sector in the second quarter as the headlines would suggest, though. Challenges still abound to be sure, but there's one decided bright spot to help offset broad weakness.
Consumers bought HP laptops and PCs in droves when COVID-19 forced them to work at home. Image source: Getty Images.
HP, Apple take a personal computer victory lap
Getting straight to the point, shipments of personal computers -- a category that includes laptops but excludes the iPad and Chromebooks -- were up 2.8% year over year during Q2 2020. That's according to data from information technology market research outfit Gartner anyway, though the same trend is confirmed by similar numbers from International Data Corporation, or IDC. IDC's final figure says PC shipments improved a little more than 11% last quarter, on a year-over-year basis.
Shipments aren't necessarily the same thing as an actual sale to an end-user, though shipments are a good indication of sell-through to consumers.
The basis of the demand isn't tough to figure out. A whole slew of people all over the world were forced to start working from home during Q2, but weren't equipped to do so. They bought what personal computers they could from an industry that wasn't quite ready for the surge. Indeed, it's impressive that PC makers were able to supply the numbers they could at all, even if that swell in demand will be short-lived.
More important to investors, personal computer revenue growth will help abate the weakness on other fronts that's sure to haunt second-quarter reports. For instance, IDC reported last month that the growing number of employees suddenly working at home means the number of pages likely to be printed this year will fall nearly 14%.
The rising tide of computer sales isn't lifting computer makers' boats evenly, however. It's proving particularly bullish for Apple, HP, and Acer. At the other end of the spectrum, Dell (DELL -2.51%) and Lenovo (LNVGY 0.60%) have been oddly disappointing on the personal computer front.
Note that IDC's and Gartner's shipment estimates are similar, even if not identical.
Gartner's Q2 Personal Computer Shipment Estimates, Comparisons
| Company | Q2 2019 Unit Shipments | Q2 2020 Unit Shipments | Q2 2019 Market Share | Q2 2020 Market Share | Change (YOY) |
|---|---|---|---|---|---|
| Lenovo | 15,541 | 16,197 | 24.7% | 25% | 4.2% |
| HP | 13,810 | 16,165 | 21.9% | 24.9% | 17.1% |
| Dell Technologies | 10,680 | 10,648 | 16.9% | 16.4% | (0.3%) |
| Apple | 4,157 | 4,368 | 6.6% | 6.7% | 5.1% |
| Acer Group | 3,241 | 4,007 | 5.1% | 6.2% | 23.6% |
| ASUS | 2,960 | 3,593 | 4.7% | 5.5% | 21.4% |
| Others | 12,658 | 9,829 | 20.1% | 15.2% | (22.4%) |
| Total | 63,047 | 64,808 | 100% | 100% | 2.80% |
Data source: Gartner Q2 2020 PC shipments report. Unit data is in thousands.
IDC's Q2 Personal Computer Shipment Estimates, Comparisons
| Company | Q2 2019 Unit Shipments | Q2 2020 Unit Shipments | Q2 2019 Market Share | Q2 2020 Market Share | Change (YOY) |
|---|---|---|---|---|---|
| Lenovo | 16,214 | 17,411 | 24.9% | 24.1% | 7.4% |
| HP | 15,366 | 18,082 | 23.6% | 25% | 17.7% |
| Dell Technologies | 11,606 | 12,010 | 17.9% | 16.6% | 3.5% |
| Apple | 4,112 | 5,594 | 6.3% | 7.7% | 36% |
| Acer Group | 4,285 | 4,828 | 6.6% | 6.7% | 12.7% |
| Others | 13,420 | 14,337 | 20.6% | 19.8% | 6.8% |
| Total | 65,003 | 72,261 | 100% | 100% | 11.2% |
Data source: IDC Q2 2020 PC shipments report. Unit data is in thousands.
A backdrop of doubt
Don't misread the message. Solid computer sales won't translate into a heroic second calendar quarter for Apple. Mac sales account for less than one-tenth of the company's revenue, and the COVID-19 overhang remains palpable.
Still, every little bit helps when things are as tough as they are right now... even for Apple.
HP, on the other hand, may fare much better than many investors are currently expecting. PC sales make up around two-thirds of its top line, and IDC and Gartner agreed that HP's computer shipments grew in excess of 17% during calendar Q2. Meanwhile, the analyst community is modeling a more than 9% decrease of its top line for the quarter ending this month. That pessimistic outlook is matched by a consensus per-share earnings estimate of $0.43, down from the $0.58 per share the company earned in the same quarter a year earlier.
Data source: Thomson Reuters/Refinitiv. Chart by author.
The proverbial chips will fall for HP sometime in late August, when it's expected to reveal the numbers for its fiscal third quarter ending this month. Apple's quarterly report slated for July 30, however, will give us an early look at how the personal computer market performed during the recently ended second quarter. Dell's next quarterly report will probably be released in late September, covering the three-month span that started in early May.
Note that Dell's revenue during the previous quarter was flat despite its two-month window to meet the needs of the work-at-home market that materialized in March. Neither Gartner nor IDC seems to think much has changed for it in the meantime.
