Enthusiasm for the personal computer sector, sparked by renewed leadership from Microsoft, is waning. Microsoft (Nasdaq: MSFT ) Windows 8 for computers will be launched alongside Windows Phone 8 for mobile on October 26 2012, both of which could not come any sooner. Shipments for personal computers declined 8.3% in the third quarter, according to Gartner. Sales were not strong during the back-to-school session.
PC shipments dropped worldwide. Year-over-year, the decline was broken down in the table below. To highlight:
- USA: -13.8%
- Asia Pacific: -5.6%
- EMEA: -8.7%
Shares for PC suppliers anticipated the weakening demand for PCs. In the month, Microsoft and Intel declined:
Advanced Micro Devices (NYSE: AMD ) fared the worst. The company has more severe problems than the industry at large. AMD warned markets that its quarterly revenue would fall 10% (quarter over quarter). AMD previously expected revenue to be a decline of 4% and up to a gain of 2%.
Sales for Windows 8 will not be accounted for as the companies report earnings. In the short term, investors should be bracing for earnings to be tepid. Intel already lowered expectations by reducing its revenue forecast.
Dell and HP shares performed as poorly as the suppliers:
Investors will conclude that the PC market is on the decline. In reality, companies not innovating their product to be appealing to consumers are experiencing the most severe decline. Lenovo was able to grow shipments by 9.8%. ASUS also grew by 11.8%.
Microsoft's Windows 8 release continues to be important for the PC industry. Microsoft Surface provides a reference design that will guide manufacturers in the right direction. The release will not mean shares in this sector will rise immediately; growth for PCs is a long-term story. Manufacturers adapting their product to function as a desktop, mobile laptop, and a portable tablet will find customers.
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Kapitall's Chris Lau does not own shares in companies mentioned above.