10 Companies Hurt By The PC's Downfall4:00 PM EST Fri. Jan. 04, 2013
In the tech world, 2012 will be known forever as the year PCs took a back seat to tablets and smartphones. Consumers flocked to these ultra-mobile devices for both work and play, causing notebook and desktop sales to plummet; both IDC and Gartner reported global PC shipments to be down more than 8 percent in the third quarter of 2012 alone.
The result, for PC and chip manufacturers alike, has been an ugly one. Sluggish demand for notebooks has wreaked havoc on the financial health of companies ranging from Dell to AMD, many of which are also forecasting a not-so-rosy 2013. Here are 10 companies suffering from the PC's decline.
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Hewlett-Packard was one of several PC makers that saw its desktop and notebook sales plummet this year, as consumers flocked to smartphones and tablets.
In its fourth quarter alone, HP saw a 14 percent year-over-year decline in revenue for its Personal System Group, with both desktop and notebook unit sales down 12 percent compared to the same period the year before.
In October, about one month before HP revealed these dismal fourth-quarter figures, CEO Meg Whitman warned investors that it may take a while for the beleaguered PC maker to get back on track, especially given the state of the overall market. "The recent financial performance of HP has not been good," Whitman said at a meeting with investors. "It's going to take longer to right this ship than any of us would like."
HP also announced in May it plans to cut 27,000 jobs, or about 8 percent of its workforce, in an attempt to cut costs. In September, the company revealed plans to cut an additional 2,000 jobs.
Like HP, Dell has struggled to keep its PC business healthy amid a backdrop of falling notebook and desktop sales. The company reported in November third-quarter revenue of $13.7 billion, down 11 percent from the $15.4 billion it reported during the same quarter of 2011. Dell's desktop PC revenue dropped 8 percent year-over-year, while its mobile PC revenue fell an even harder-hitting 26 percent compared to the same period last year.
"We're sticking to mid- to high-value portions of [the PC] business, and we're not chasing low-value business," Dell CFO Brian Gladden said during a conference call with analysts announcing the results.
To help lighten the blow dealt to its PC business, Dell is placing a new emphasis on enterprise solutions and services, and its bet, so far, has paid off. The company saw its enterprise networking revenue rise 40 percent year-over-year in the third quarter alone.
PC makers aren't the only ones struggling to stay afloat in today's weakening PC market; chip makers like Intel also are taking a hit, as demand for their laptop and desktop CPUs continues to wane.
Intel in the third quarter saw revenue for its PC Client Group fall 8 percent year-over-year and said its overall revenue of $13.5 billion was flat compared to the same period in 2011. According to analyst firm IHS iSuppli, Intel will see its annual revenue decline 2.4 percent in 2012, whereas manufacturers of ARM-based chips, such as Qualcomm, are poised for growth. ARM-based processors dominate the smartphone and tablet markets.
Intel CEO Paul Otellini (pictured), who is set to retire in May, admitted in November that the chip maker faces its share of challenges, but reminded investors that the company has a "history of navigating the industry's transitions and emerging better and stronger."
AMD has fared even worse than its rival Intel as laptop and desktop sales soften.
The Sunnyvale, Calif.-based chip maker announced in October its plans to cut approximately 15 percent of its global workforce -- or nearly 1,700 jobs -- in an effort to cut costs and remain competitive. In the same breath, the company also announced dismal third-quarter earnings, including a 25 percent year-over-year drop in revenue and a net loss of $157 million.
"Shortly after joining AMD, I talked about the fundamental changes occurring in the PC industry," said AMD CEO Rory Read (pictured), when announcing the earnings and layoffs. "These trends are occurring now at an even faster rate than anticipated."
Read said AMD would start shifting some of its focus away from PCs until the market stabilizes and instead pursue more lucrative markets, such as the data center.
Acer -- the world's fourth biggest PC maker, according to Gartner -- has also seen its PC shipments drop substantially over the past few months, particularly within the U.S.
Gartner reported in October that Acer's global PC shipments were down 10.3 percent year-over-year in the third quarter. In the U.S., those shipments fell an even more drastic 28.2 percent.
Also in October, Acer reported a third-quarter profit of about $2.32 million, missing analysts' expectations by a landslide. The Taiwanese PC maker, at the time, pointed to Microsoft's Windows 8 software as a beacon of hope for future growth. But some analysts, like the NPD Group, don't think Microsoft's new OS is rejuvenating the PC market as vendors like Acer had hoped.
Just days before unveiling Windows 8, Microsoft in October reported third-quarter earnings that proved its OEM partners weren't the only ones grappling with sluggish PC sales.
For its first fiscal 2013 quarter, ending Sept. 30, Microsoft reported revenue of $16 billion, down 7.9 percent from the $17.4 billion it reported one year earlier. Net income was $4.5 billion, down more than 22 percent year-over-year, and Microsoft's CFO Peter Klein referred to the PC market as being "challenged" during a conference call with investors.
Aware that its bread-and-butter PC market is shrinking, Microsoft is attempting with Windows 8, along with its Windows Phone OS, to elbow its way into the tablet and smartphone market. But so far, the company has faced a largely uphill battle, attempting to claw market share away from market leaders Apple and Google.
Even the almighty Apple has faced its fair share of struggles in today's post-PC world.
Gartner said in October that Apple's shipments for its Mac desktop and notebooks were down 6.1 percent year-over-year in the U.S. In its quarterly earnings call three months earlier, Apple said it sold 4 million Macs in its third fiscal quarter, the same figure it posted in the second quarter, and a growth of just 2 percent year-over-year.
Of course, even a 2 percent growth rate should be considered a feat, given today's unforgiving PC market. But when you compare the 4 million Macs Apple shipped in its third quarter to the 26 million iPhones or 17 million iPads that were also sold, it seems even Apple's PCs have fallen victim to the flourishing tablet and smartphone markets.
"Big box" giant Best Buy has been hurt by soft consumer demand for notebooks just as much as the PC makers showcased in its stores.
The Minneapolis-based company in November confirmed what it called a "significant" decline in its fiscal third-quarter earnings, reporting a net loss of $10 million compared to the $156 million in income it announced during the same quarter the year before. Best Buy saw a jump in sales for tablets, smartphones and e-Readers, but said it wasn't significant enough to offset the declines it saw in other business units, including televisions and notebooks.
To help stay afloat, Best Buy said in March of last year (after coming off yet another dismal quarter) it will close 50 of its U.S. stores and cut nearly 400 corporate and support jobs.
Of all the world's top PC makers, Toshiba has taken the biggest hit, at least in the U.S., from waning consumer demand.
Gartner said in October that Toshiba's PC shipments to the U.S. were down a hefty 33 percent year-over-year in the third quarter of 2012. That drop ultimately dealt a blow to Toshiba's third-quarter financials; the Tokyo-based company said its net sales fell 7.8 percent compared to the same period in 2011, with its PC sales, specifically, plummeting 16 percent year-over-year.
As Gartner projected, Toshiba said its PC business took a hit particularly within the U.S., despite sales actually being on the rise in its home base of Japan.
Much like rival chip makers Intel and AMD, Marvell Technology has seen its sales shrink in light of the beleaguered PC market.
In November, the Santa Clara, Calif.-based company said its revenue for the third quarter of fiscal 2013 was $781 million, down 4 percent year-over-year and an even greater 18 percent compared to the previous quarter. Like its competitors, Marvell attributed the fall to a "slowdown in PC demand" and said moving forward it would place a new emphasis on its storage business, where it saw share gains in both the hard drive and solid state drive markets.