PC Makers Have a Peak to Scale

    The day after the fourth quarter of 2016 ended, it was already clear that one of the biggest trends in smartphones for 2017 would be the shrinking of the display diagonal. This year, Samsung is going even smaller – the Galaxy S21 is the first phone from the Korean giant to feature a 6.1 inch screen.

    This article is about the upcoming ‘Q2-Q3’ sales of PC makers. While they have a peak to scale should they be forced to produce more units.

    PC makers are at the peak of their ability to scale, and this peak is extremely powerful, but there is a problem — they do not have the means to adjust for any new tech that hits the market. PC makers are at the peak of their ability to scale, and this peak is extremely powerful, but they do not have the means to adjust for any new tech that hits the market, an industry source said this week.. Read more about best pc building site and let us know what you think.Life has been good lately for

    HP

    HPQ -8.94%.

    и

    Dell Technologies.

    Many investors seem to think that the personal computer industry is second to none.

    The growing demand for personal computers has prompted HP and

    Dell

    DELL – 1.06%.

    Two of the strongest large-cap technology stocks this year. Prior to the latest quarterly reports published Thursday, HP was up 31% year-over-year and Dell was up 36%. This figure is considerably higher than the two

    Microsoft

    MSFT 0.15

    и

    Apple

    AAPL -0.53%.

    -two of the most valuable companies on the market, which are also sufficiently influenced by the PC market.

    This set the bar high for both companies’ results for the fiscal quarter that ended in April. But they both did. HP’s revenue rose 27% year-on-year to about $15.9 billion.

    Hewlett Packard Company

    Brother or Sister in 2015. Dell’s revenues increased 12% year-over-year to about $24.5 billion. Both figures far exceeded Wall Street estimates. PC sales account for just over half of Dell’s total revenue and just over 60% of HP’s.

    Still, shares of both companies fell Friday after the results were announced. HP shares fell 9% as analysts said the per-share earnings outlook for the fiscal year ending in October reflects pressure in the second half of the year. The company attributed this to rising raw material and logistics costs. The company also said the ongoing chip shortage will negatively impact its ability to meet demand for PCs and printers. Dell shares fell 1.1% as the company also cited supply shortages as a factor in a slight decline in July-quarter sales from its usual steady performance in recent years.

    According to Gartner and IDC, which track PC sales, they’ve been mature for years: global PC sales fell every year between 2012 and 2018. Microsoft’s discontinuation of support for Windows 7 sparked a small upgrade cycle in 2019, but the pandemic only really spurred demand as workers and students sent home desperately needed to arm themselves. According to IDC, PC and Chromebook sales increased 13% to 302.6 million units in 2020 and 55% year-on-year in the first quarter.

    In the fiscal quarter ending in April, HP’s revenues increased 27% year over year to approximately $15.9 billion.

    Photo:

    David Paul Morris/Bloomberg News

    Analysts are ambivalent about the extent of the sector’s potential. We fear that growth in PC demand in 2020 and 2021 will be a one-time bump, writes Bernstein’s Tony Sacconaghi. Jim Suva of Citi believes that investors are too negative about the industry’s prospects, as we expect society to steadily increase the number of PCs installed, given the need for flexible working and education. David Vogt of UBS agreed, writing on Friday that our analysis of purchase intentions and channel ratings confirms that a sustained demand environment is offsetting concerns about peak yields.

    Wall Street expects a significant slowdown in growth for both companies in the current fiscal quarter, which ends in July. But neither HP nor Dell are terribly expensive. Both stocks were already trading at about a third of the average earnings multiple on the Nasdaq before Friday’s decline. That’s not such a good prospect if it turns out that the PC boom continues.

    Email Dan Gallagher at [email protected].

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