DELL, HPQ: PC Industry on a Treadmill

By Douglas A. McIntyre Published Jan 18, 4:11AM EST

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By William Trent, CFA of Stock Market Beat

In May, 2006 we noted that things were tough in the PC industry, with the HP/DELL/Lenovo troika competing heavily for market share at the expense of profitability.

DELL has cut its earnings estimates for the first quarter, saying the shortfall “was driven primarily by pricing decisions in the second half of the quarter.” With prices falling at a faster rate than unit sales are growing, it is tough to show any gains on the top line.

Over the course of the year, that thesis played out in large scale.

Global PC shipments grow, but revenue remains flat | CNET News.com

Shipments of desktops, notebooks and servers with processors from Intel and Advanced Micro Devices grew by about 10 percent worldwide in 2006, according to figures released Wednesday from research firm Gartner. During the calendar year, 239.4 million PCs left factories.For the year, revenue generated from worldwide PC sales across the industry, however, remained flat at $201.1 billion, according to the firm’s early estimate. It doesn’t appear that 2007 will bring much change. PC shipments will go up by 9.9 percent, Gartner predicts, but revenue will only climb to $201.3 billion.

“It is going to be a tough year,” said Charles Smulders, an analyst for Gartner.

The crazy thing is, though, that 2006 wasn’t especially brutal for PC pricing. While price drops were generally in the low double digits, looking back through history it was one of the slowest paces of price declines on record.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.