PC Shipments Falling: Will the Industry Ever Rebound?

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Microsoft (Nasdaq: MSFT  ) says that flooding in Thailand will probably lower industrywide sales of personal computers and may disappoint analyst projections for the fourth quarter.

Flooding in Thailand disrupted disk-drive factories which ultimately affected PC production. The hiccup came at a fragile period for Microsoft: The company already faces stiff competition from tablets and smartphones.

"Windows is their most profitable business. If that's not stable for whatever reason -- Thailand, Apple -- it just becomes difficult for the stock to gain momentum," says Brendan Barnicle, an analyst at Pacific Crest Securities in an interview with Bloomberg.

Analysts estimate total PC shipments fell about 1% in the fourth quarter, and some expect it fell even more. The company has missed analyst targets for three of the past four quarters. Microsoft's announcement convinces analysts they will fall short again.

According to Bloomberg, analysts on average predict Microsoft's total sales in its second fiscal quarter ended in December will rise 5.3% to $21 billion.

Business section: Investing ideas
Microsoft may be hitting a rough spot, so which other companies are at risk?

As an example, Bloomberg reports Intel (Nasdaq: INTC  ) , the world's biggest computer-chip maker, cut its fourth-quarter revenue forecast by $1 billion last month, citing the disk-drive shortages.

Let's assess the industry's damage by looking at some of the major players involved with Microsoft. Do you think these companies will be dragged down this quarter? (Click here to access free, interactive tools to analyze these ideas.)

1. Dell: Provides integrated technology solutions in the information technology industry worldwide. Market cap of $28.38B. The stock has had a couple of great days, gaining 5.19% over the last week.

2. Hewlett-Packard (NYSE: HPQ  ) : Hewlett-Packard offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap of $52.84B. The stock has gained 3.2% over the last year.

3. Intel: Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap of $131.37B. Offers a good dividend, and appears to have good liquidity to back it up -- dividend yield at 3.26%, current ratio at 2.24, and quick ratio at 1.91. The stock has gained 13.21% over the last year.

4. Marvell Technology Group: Designs, develops, and markets analog, mixed-signal, digital signal processing, and embedded and stand-alone ARM-based microprocessor integrated circuits. Market cap of $8.91B. Might be undervalued at current levels, with a PEG ratio at 0.8, and P/FCF ratio at 10.56. The stock has had a couple of great days, gaining 7.61% over the last week.

5. Microsoft: Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap of $233.19B. The stock has gained 3.43% over the last year.

6. NVIDIA (Nasdaq: NVDA  ) : Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap of $8.67B. The stock has lost 2.94% over the last year.

7. Seagate Technology: Designs, manufactures, markets, and sells hard disk drives for the enterprise, client compute, and client non-compute market applications in the United States and internationally. Market cap of $7.85B. This is a risky stock that is significantly more volatile than the overall market (beta = 2.18). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.85%, current ratio at 1.97, and quick ratio at 1.7. Exhibiting strong upside momentum--currently trading 14.21% above its SMA20, 12.67% above its SMA50, and 27.9% above its SMA200. The stock has had a couple of great days, gaining 11.12% over the last week.

8. Western Digital (NYSE: WDC  ) : Engages in the design, development, manufacture, and sale of hard drives worldwide. Market cap of $7.80B. The stock has had a couple of great days, gaining 6.58% over the last week.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen does not own any of the shares mentioned above. Rebecca owns shares of DELL. Data sourced from Finviz.

The Motley Fool owns shares of Microsoft, Intel, Western Digital, Apple, and Marvell Technology Group. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel, Apple, Microsoft, Dell, and NVIDIA. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts in NVIDIA. Motley Fool newsletter services have recommended creating a bull call spread position in Intel. 

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (2)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2012, at 2:21 PM, jwtrotter wrote:

    These articles about PC sales are a joke for one reason, they completely overlook the rate of growth in the emerging markets and never account for the surprise earnings from companies that directly benefit from those markets, ie China and others. That's why Nvidia for example keeps meeting their projections and exceeding them.

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