Every technology manufacturer is being pinched by the global semiconductor shortage. Computer maker HP (HPQ 0.31%), however, is bearing more than its fair share of the chip shortage's brunt.

That's the takeaway from tech market research outfit IDC's look at third quarter personal computer (PC) sales anyway. The recently published report indicates HP was the only major personal computer brand to ship fewer computers during Q3 of this year compared to Q3 of last year.

Were it just last quarter, the weak results might be forgivable, and even dismissible; these are strange circumstances and difficult times. It's not just last quarter's waning shipments though. While HP is a key fixture of the personal computing and printer landscape and will be around well into the future, the next few quarters -- and the fiscal Q4 report due in November in particular -- could prove rocky as the company works its supply logistics to make them look a little more like its competitors.

Losing ground in more ways than one

As the old saying goes, a picture is worth a thousand words. Take a look. According to IDC, HP lost more market share last quarter than any other major computer brand. A year ago it accounted for 22.4% of the PC market, and 22.2% for the second quarter of this year. That figure's been pared back to 20.3% as of September, extending a trend that's been brewing for a couple of years now.

Bar graph of PC market share by vendor from Q3 2019 to Q3 2021.

Source: IDC. Chart by author.

The concern evolves into alarm given how HP was also the only PC name to deliver fewer units -- 5.8% fewer to be precise -- in the third quarter of this year than it did during Q3 of 2020. The alarm becomes an outright red flag in light of the fact that overall personal computer shipments grew 3.9% year over year last quarter, led by Dell Technologies' 26.6% growth in deliveries, and further lifted by Apple's 10% improvement.

Line graph of worldwide PC shipments by vendor from Q3 2019 to Q3 2021.

Source: IDC. Chart by author. Shipment data is in thousands of units.

HP's steep sequential decline from Q2's deliveries is just the proverbial knockout punch.

The fix(es)

What gives? HP CEO Enrique Lores laid it out in no uncertain terms during August's fiscal third-quarter earnings call, explaining, "we continue to navigate supply availability and logistics constraints, pricing dynamics and the pace of economic reopening." It's a message few found surprising.

What many investors might have easily looked past, however, are the specific underlying reasons HP is struggling more than other PC makers at this time.

One of those reasons is simply how the computer and printer giant gets the most basic of things done. In response to an analyst's question about HP's struggle, Lores explained, "as you know we have an outsource model, where the majority of our production is managed by ODM [original design manufacture]," meaning the seller or even the consumer is the ultimate designer of the final product. The approach works when the supply chain isn't broken, but Lores conceded the current supply chain crunch requires HP's direct involvement in procuring components. That's happening now.

Computer technician installing a microchip on a computer circuit board.

Image source: Getty Images.

Another impasse being addressed is the fact that HP's products collectively use too many different chips, when the same single chip could be effectively used in more models. As Lores put it, "one of the key things of our PC business is the breadth of our portfolio ... but this portfolio had not been designed to optimize for low cost component, which is what we are missing now." He made a point of adding, "We have been changing that."

Finally, Lores pointed out during HP's most recent earnings call that the company has been in the midst of deploying a new ERP (enterprise resource planning) system. The new system will help check for adequate availability of important technological components before committing to a particular design.

Again, all of these challenges are being addressed now. Many of these revamping efforts may even be complete. Others could take more time to put in place though, stifling this complicated company's growth prospects for a few more quarters. IDC's third quarter PC shipment snapshot may well be a preview of what to expect in the foreseeable future.

Plan on more near-term turbulence

None of this changes the long-term bullish thesis for HP. It's still one of the world's most respected and accessible personal computer brands; and to his credit, Lores seems to have his finger on the pulse of what needs to change so something like this year's chip shortage can't take again the sort of toll it's already taken. Better still, investors looking for a quality name at a bargain price could use the stock's recent lull to scoop up HP shares on the cheap. HP shares are currently priced at only a little over seven times next fiscal year's projected profits of $3.79 per share, versus its historical average earnings multiple of around eight or nine. 

Nevertheless, the overhaul underway at HP isn't the sort of overhaul that's quick and easy to put in place. Given IDC's data, current and prospective HP investors may want to brace themselves for at least one more disappointing quarterly report in November.

The good news is, what has to happen to get this PC manufacturer back on a growth track is rather clear. Investors should be scrutinizing its production-outsourcing process and product-planning model... not that such nuances are particularly easy to read.