Systems and PC hardware

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Market analysis

The continuing transition from desktop and traditional laptop PCs to notebooks, hybrids (a combination of tablet and laptop computer) and Windows tablets meant mixed results for Systems and PC Hardware companies in the first quarter.

Worldwide PC shipments1 totaled 71.7 million units in Q1 2015, a 5.2% decline from 75.7 million units in Q1 2014 when the PC industry received a boost from the end of Windows XP support, leading many companies to replace PCs. That replacement cycle faded in Q1 2015. Desk-based PC shipments declined rapidly due to the continuing transition to notebooks, hybrids and Windows tablets, with business desk-based PCs being impacted the most. However, the overall PC decline is not expected to be long term in nature. Mobile PCs, including laptops, notebooks, hybrids and Windows tablets, grew compared with a year ago. Mobile PC sales increases are due to a separate underlying replacement cycle driven by thin and light notebooks with tablet functionality, leading to the uptick in mobiles in the first quarter. Hybrid notebooks are expected to see some growth, especially in mature markets. 2

Lenovo and HP were the only two vendors among the top five worldwide that experienced an increase in PC shipments in Q1 2015. Lenovo shipped 13.6 million units in Q1 2015, a 5.7% increase over the 12.8 million units in Q1 2014. It experienced its strongest growth in Europe, the Middle East and Africa (EMEA) and the US. It has become one of the top providers of hybrid notebooks. HP performed moderately well in the first quarter, with shipments growing by 2.5% from 12.1 million units in Q1 2014 to 12.4 million units in Q1 2015. It increased its US market share from 24.9% in Q1 2014 to 26.1% in Q1 2015, and maintained its top position in both the US and EMEA.2

PC shipments in EMEA reached 20.2 million units in the first quarter of 2015—a 7.7% decrease year over year.3

Device vendors are expected to raise PC prices to offset the effects of currency devaluation against the US dollar. Prices of PCs in the Eurozone and Japan, in particular, are expected to increase by up to 10% during 2015.3

The Western European printer and multifunction printer (MFP) market increased 2.6% in unit terms in Q1 2015 (5.49 million units—an increase of 138,621 units), with positive growth for both inkjet and laser segments. Revenues also increased by an impressive 8.4% as more high-speed laser MFPs and business inkjets were shipped.

Business inkjets had a strong Q1 2015, with a 21.6% year-over-year increase and MFP products showing the highest growth rates. Germany alone represents 30% of the business inkjet market, followed by the UK and France. MFP products accounted for 78.1% of all shipments. Both the MFP and printer markets increased, at 2.7% and 2.4%, respectively. The Laser market showed an overall 4.1% year-over-year increase.

IBM’s Q1 2015 net income from continuing operations was US$2.4bn, down 5% year over year, including losses from discontinued operations related to the Microelectronics business and the impact of US$200mn in pension-related pre-tax charges for IBM Spain. Total revenue from continuing operations was US$19.6bn, down 12%.

Lenovo Group delivered strong year-over-year performance in Q1 2015, but experienced sequential decline due to seasonality and significant currency impact. Revenue was US$11.3bn, up 21% year over year, but would have been 28% with constant exchange rates. On a sequential basis, revenue dipped by 19.6% against US$14.1bn in Q4 2014. Lenovo reported quarterly net income of US$100mn, after adjusting for US$94mn non-cash M&A related accounting charges. Lenovo’s M&A investments and organic growth in smartphones, tablets, servers and other services contributed 37% to revenues in the quarter compared to 17% the year before. Lenovo had exceptional performance in PCs this year, with 60 million shipments in FY 2014-15 compared to 55 million shipments in FY 2013-14.

HP posted revenue of US$25.5bn in Q1 2015, a 6.8% year-over-year decline against US$27.3bn in Q1 2014 and a 5.2% sequential decline against US$26.8bn in Q4 2014. The year-over-year revenue decline was noted across all reporting segments, most notably in Enterprise Services (-16%) and Software (-8%). Personal Systems, which includes notebooks, desktops, workstations and other computing devices, saw revenue dip by 5% even though shipments were up by 2.5%. Desktop revenue was down 17%, while shipments were down 14%. Although notebook revenue was down 5%, shipments were up 19%, reaffirming the shift of the market from desktops to notebooks, hybrids and tablets. HP’s net income for the quarter was US$1bn after adjusting for a US$269mn separation cost in relation to its split into two entities, HP Enterprise and HP Inc.

  1. Desk-based PCs, notebook PCs, and premium ultramobiles
  2. Gartner, May 2015
  3. IDC, May 2015

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