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Market analysis

Worldwide PC shipments totaled 74.4 million units in Q2’14, resulting in a 1.7% year-over-year decline. However, this was the smallest decline in global PC shipments since Q2’12 when reduced shipments of mini notebooks combined with a surge in tablet sales disrupted the PC market. On a geographic basis, Europe, the United States and Canada showed the strongest growth, reflecting more stable conditions. New taxes and high growth in the last quarter limited this quarter’s growth for Japan. A weaker economy and political issues resulted in continued decline for PC volumes in the emerging regions. Worldwide tablet shipments totaled 49.3 million units in Q2’14, year-over-year growth of 11%, but a decline of 1.5% quarter over quarter. Looking forward, the tablet market is expected to experience positive but slower growth in 2014 compared to the previous year.1

Computer hardware sales in the US experienced volatile performance during the 2009-2013 period, but stronger growth is expected towards 2018, with an anticipated CAGR of 8.9% for the five-year period 2013-2018. This is expected to drive the market to a value of US$109.7bn by the end of 2018. Comparatively, the European and Asia-Pacific markets are forecast to post 6.8% and 13.3% CAGRs respectively over the same period, reaching respective values of US$75.8bn and US$106.8bn in 2018.2

In Q2’14, Lenovo’s sales increased by 18% year over year to US$10.4bn. Sales by the Group’s PC and other personal technology products were US$8.5bn, representing a year-over-year increase of 16%. Mobile device sales increased by 32% year over year to US$1,591mn. Sales of other goods and services were US$294mn. Gross margin decreased year over year to 13% due to higher mix from consumer products. Lenovo’s operating expenses increased by 8% year over year to US$1.1bn, mainly attributed to increased marketing and promotion expenses.

HP’s revenue increased 1% year over year to US$27.6bn. The Personal Systems, Printing and Enterprise Group segments sales increased by 12%, 4% and 2% respectively, while year-over-year sales of the Enterprise Services, Software and HP Financial Services segments decreased by 6%, 5% and 3%, respectively. In the Personal Systems segment, commercial revenue increased by 14% and Consumer revenue increased by 8%. Total units were up by 13% with Desktop units up 9% and Notebooks units up 18%. HP’s Q2’14 net income decreased by 29% year over year to US$985mn on account of higher restructuring charges (US$649mn compared to US$81mn in Q2’13) and a shift in product mix from higher to lower margin products. Cash flow was positive at US$3.6bn.

EMC reported 5% year-over-year growth in net revenues to US$5.9bn. Much of the growth was driven by VMware (+17%), Pivotal (+28%) and RSA Security (+7%) while core information storage revenues remained nearly flat at US$4bn as EMC's market share in external storage systems saw further decline.

  1. IDC, July 2014
  2. MarketLine, July 2014; Avention, July 2014
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