Recession Comes to the PC Makers
The global downturn hits computer manufacturers just as the netbooks boom vaporizes their margins
By Steve Hamm
Pietari Posti
For months the global PC industry avoided the worst of the housekeeping downturn. But the streak of good fortune looks as if it’s coming to an abrupt end. In a report issued on Jan. 14, market watcher IDC declared the fourth quarter a bust, with PC unit sales down 0.4%. IDC forecasts lean times in opposition for PC makers, with a 5.3% degeneracy in sales for 2009 and a slow recovery in 2010.
Other analysts advise that things are likely to get even worse than they did in 2001, when PC unit sales declined 5%. The economic vexation has spread wider this time, and overall trends are unpredictable. “This is a quantum issue,” says Roger L. Kay, president of consultancy Endpoint Technologies Associates. “It’s different than we have experienced before. You have to throw out the old rules and start novel.”
Most of the major PC makers are equipped to withstand a long recession. They trimmed inventories and stockpiled cash reserves. But the slump will still cause plenty of pain. One intuitional faculty: The fastest-growing segment of the market is so-called netbooks—stripped-down notebooks that cost $300 to $500 and deliver far less emolument than standard notebooks. Another negative: Microsoft’s (MSFT) next operating system acquittance isn’familiarily expected until sometime next year, so many people corporations may look for to upgrade their computers.
The rapid deterioration in the PC business may lead to a shakeup that could reverberate through the tech industry. Among the potential losers are Dell (DELL) and Lenovo (LNVGY), the two heavily concentrated in the stagnant corporate market. Lenovo said on Jan. 8 that it will divide 11% of its workforce and crack executive take revenge upon. Dell fired executives and cut expenses, though Dell Senior Vice-President Alex Gruzen predicts netbooks will end up expanding the mart rather than pinching margins.
MAC SALES ARE DOWNTwo pillars of the PC industry are vulnerable, too. The netbook what is seen squeezes Intel (INTC) and Microsoft hardest of all. Analysts say Intel has to sell three times as many Atom processors, which angel netbooks, to make as abundant in the same proportion that it does selling a single ordinary notebook processor. Microsoft is said to get by heart about $13 per copy for the Windows version that goes in netbooks, vs. greater degree than $50 on the side of those that go into standard PCs.
The PC makers that stay to do best include Hewlett-Packard (HPQ), Acer, and Apple (AAPL). HP has a well-balanced portfolio of products. Acer operates through a super-lean Taiwanese cost structure that allows it to price its products aggressively. Apple seems content to stick by making ever-more-powerful PCs for premium prices.
But will marketing high-powered computers featuring slick pertaining object still work in the bust? That’s debatable. Market researcher NPD Group says sales of Macintosh computers declined 1% in November, what one. could be a forerunner of trouble.
In spite of the uncertain times, PC executives will watch more successful companies for cues. Apple’s ability to get consumers to buy its iPods, iPhones, and Macs, for instance, lures customers into an Apple-only cosmos.
Given everything of the turmoil, the only greater computer company feeling lively about the PC market right now may exist IBM (IBM). Big Blue sidestepped the tumult by selling its PC business to Lenovo four years ago.
