Systems and PC hardware

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Market analysis

PC growth in mature markets was offset by a decline in emerging markets in Q3’14. Worldwide PC shipments reached 79.4 million units, a 1% decline year over year. Positive results in Western Europe and North America may be a sign of gradual recovery for the PC industry. Consumer attention is slowly returning to PC purchases as tablet adoption has slowed — tablet penetration has reached the 40%-50% range.1

In contrast, weakness in the emerging markets reflects the saturation in selected consumer segments that can afford PCs. At the same time, consumers who don’t have PCs will likely buy low-priced tablets. For the first time, the sum of the top five vendors' share reached two-thirds of worldwide PC shipments. All top 5 vendors showed stronger growth compared to the industry average. Scale is one important success criterion for vendors to survive in the PC market. Some vendors have already scaled back or have withdrawn from the PC business — namely Samsung and Sony — and in Q3’14 Toshiba also announced plans to restructure its PC division.1

While its overall growth rate slightly declined in PC shipments, HP was able to post single-digit growth to maintain the No. 2 position worldwide. HP was the No. 1 vendor in EMEA and the US. While HP announced its intention to split into two companies, the impact to the PC business operation should not be significant.1

The worldwide tablet market is expected to see a massive deceleration in 2014 with year-over-year growth slowing to 7%, down from 53% in 2013. At the core of this slowdown is the expectation that 2014 will represent the first full year of decline in Apple iPad shipments. Both the iPad and the overall market slowdown do not come as a surprise as device lifecycles for tablets have continued to lengthen, increasingly resembling those of PCs more than smartphones.2

In the early stages of the tablet market, device lifecycles were expected to resemble those of smartphones, with replacement occurring every two to three years. What has played out instead is that many tablet owners are holding onto their devices for more than three years and in some instances more than four years. It is believed that the two major drivers for longer-than-expected tablet lifecycles are legacy software support for older products, especially within iOS, and the increased use of smartphones for a variety of computing tasks.2

Among different form factors and product groups, significant advancements have been made recently by hardware manufacturers to advance the 2-in-1, or detachable, product category. Devices have become thinner, prices have come down and more models are available. Despite these advances, shipments of 2-in-1 devices are only expected to reach 8.7 million units in 2014, which is just 4% of the total tablet plus 2-in-1 market. A large reason for the relatively small uptake has been consumer hesitancy around the Windows 8 platform, which the majority of 2-in-1 devices are built upon.2

IBM has reached an agreement under which GlobalFoundries will acquire its Microelectronics OEM semiconductor business and manufacturing operations. The transaction with GlobalFoundries is expected to close in 2015. The results from continuing operations exclude the Microelectronics business, which is presented separately as discontinued operations. The charge also includes other estimated costs related to the transaction, including cash consideration of approximately US$1.5bn expected to be transferred to GlobalFoundries. The cash consideration is expected to be paid to GlobalFoundries over the next three years and will be adjusted by the amount of the working capital due by GlobalFoundries to IBM.

  1. Gartner, Nov 2014
  2. IDC, Nov 2014

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