PC Sales Plunge Threatens HP and Dell

For the year, PC shipments were 315.9 million units, a 10 percent decline from 2012. This is the worst decline in PC market history, equal to the shipment level in 2009

At the current rate of decline, the number could fall well below 300 million, a sum that would have been unimaginable just two years ago. No combination of price and new, extraordinary features has been able to even modestly halt the rush to smartphones and tablets. That leaves the future of Hewlett-Packard Co. (NYSE: HPQ) and Dell clouded, if not terrible.

The matter was made worse for the two U.S. companies because Lenovo has taken the top spot among PC companies, based on shipments in the fourth quarter of last year. It took 18.1% of the world’s market. HP was second at 16.4%, followed by Dell at 11.8%. HP’s market share also eroded.

The myth about Dell and, to a lesser extent, HP is that they are no longer PC companies. Each says it has become well diversified into software and services. Each claims to have branched into serving large corporate customers and governments. Each points to these as new engines of growth. But the comments from the companies about these trends are an illusion.

HP’s PC revenue dropped 10.2% in its most recent fiscal year. Printer revenue was off 2.6%. One of the division that was supposed to offset this was enterprise services, but revenue there fell 5.4%. And software sales dropped 3.6%. So much for the plan to salvage HP’s future via diversification. Unless its core business of PCs and printers recovers, the spiral cannot go anywhere but down.

Part of the wisdom about PC sales is that as they deteriorate, related companies such as Microsoft Corp. (NASDAQ: MSFT) and Intel Corp. (NASDAQ: INTC) will be rapidly crippled as well. However, Microsoft proved long ago that its business software operations are a wild success. Intel has at least some chance to make chips that can power the new generation of tablet and smartphone devices.

HP and Dell have moved into a world that is unique. They do not have a single way out of their troubles. Experts have anticipated this for some time. Now, it has become true.