Wall Street Beat: PC makers face rough end of year

While Apple rides high, other tech manufacturers like HP and Dell confront a tough market

By , IDG News Service |  IT Management

While Apple started out the week claiming a stock market record, the news was much bleaker for other manufacturers, like Dell and Hewlett-Packard, which face a slowdown in the PC arena.

Apple's share price, juiced by excitement over the expected release in September of a new iPhone, on Monday closed at US$665.15 for a market capitalization (share price multiplied by number of shares outstanding) of $623.52 billion. That was the biggest market cap of any business in history.

Analysts noted that Microsoft's market cap in 1999 hit $616.34 billion, the previous record, but that adjusted for inflation that number would be $850 billion today. Still, the number Microsoft achieved was at the euphoric high point of the dot-com era and in any case does not diminish Apple's accomplishment.

When Steve Jobs came back to Apple in 1997 the company was close to bankruptcy, but subsequently a series of hit products including the iPod, iPhone and iPad made it into a consumer electronics powerhouse and breathed new life into the Mac family.

But while Apple is riding high, other tech manufacturers are looking at a slump.

On Thursday, IDC said that it expects growth in the PC market to be slower than last year. Midyear shipments dipped as consumers worried about the uncertain economy and postponed purchases to evaluate Windows 8 and Ultrabook products, IDC said. The PC market is expected to grow by only 0.9 percent this year, down from 1.7 percent last year.

"As we move into the tail end of the third quarter, PC activity will continue to slow as demand drops," said analyst David Daoud in a statement accompanying the report. "We expect the year will end with shipments in the U.S. falling by 3.7%, marking the second consecutive year of contraction."

News from PC makers earlier in the week presaged the dismal forecast.

Dell, the third biggest PC maker in the world after HP and Lenovo, announced Tuesday that for the quarter that closed Aug. 3, profit declined year-over-year by 18 percent to $732 million, while revenue fell 8 percent to $14.48 billion. The bulk of Dell's revenue comes from PC sales, down 9 percent from last year. Laptop and other mobile products were down 19 percent.

Revenue from services was up 3 percent, however. Dell is making a bet that services and enterprise sales will boost profit, and also on Tuesday announced that it is tapping a former Hewlett-Packard executive, Marius Haas, to run its server, networking and storage division.

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