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Tight Education Budgets Drive PC Slump

Tighter budgets in the education sector contributed to significant declines in desktop and notebook PC shipments in the United States in the second quarter. According to two new reports released this week, the domestic PC market was off by anywhere from 5.7 percent to 10.6 percent, with Apple and Lenovo showing the only gains among the top manufacturers.

According to preliminary data released by market research firm Gartner, unit shipments in the second quarter fell off 5.7 percent compared with the same period in 2011, with total shipments dropping from 16.87 million to 15.91 million.

The factors leading to the decline in the United States were several, according to Gartner, including lack of interest on the part of consumer, anticipation of new machines running Windows 8, weak public sector spending, and belt tightening in the education sector.

“Weakness in the U.S. public market affected the professional segment despite the high PC procurement season in the second quarter,” said Mikako Kitagawa, principal analyst at Gartner, in a prepared statement. “Both government and education institutions are encountering tight budget situations. Shipments to the public sector are expected to be lower than normal seasonality.”

By Gartner's preliminary reckoning, among the top-5 traditional PC players, only Apple saw any gains in the second quarter. (Traditional PCs include desktops, notebooks, and mini-notebooks, not tablets or other handheld devices.)

  • HP remained the market share leader at 25 percent in the United States (losing two points from last quarter), despite a 12.7 percent falloff in unit shipments (3.98 million units in 2Q2012 versus 4.55 million in 2Q 2011).
  • Second-place Dell (21.7 percent market share) was off 9.5 percent in unit shipments for the quarter, dropping from 3.82 million to 3.46 million.
  • Apple increased both its unit shipments and its market share. In 2Q 2011, Apple held a 10.8 percent domestic market share on unit shipments of 1.83 million. In 2Q 2012, Apple's market share rose to 12 percent on shipments of 1.91 million units.
  • No. 4 Acer and No. 5 Toshiba both saw double-digit declines in the quarter. Acer fell off 14.1 percent to 1.35 million units.
  • Toshiba dropped 19.5 percent to 1.3 million units, according to Gartner.

Aside from the public sector decline, according to Gartner: "The slowdown in the U.S. market was largely attributed to weak consumer spending on PCs. This reflects a combination of consumers’ reduced interest in PCs, and vendors reduced willingness to sell PCs due to other products and services that consumers are interested. The major promotion of Ultrabooks could potentially change the market dynamics."

Worldwide, the slump was less dramatic, falling just 0.1 percent to 87.47 million units in Q2 2012 from 87.56 million in Q2 2011. Q2 2012 was the seventh consecutive quarter of slow growth or no growth in PC sales worldwide, according to Gartner.

According to Gartner's Kitagawa: “Consumers are less interested in spending on PCs as there are other technology product and services, such as the latest smartphones and media tablets that they are purchasing. This is more of a trend in the mature market as PCs are highly saturated in these markets. A big portion of R&D spending has been allocated to Ultrabook development, together with Intel’s massive investments to establish the market segment. Though Ultrabook was at first introduced in the market in 2011, the major promotion kicked off toward the end of 2Q12 with the Ivy Bridge-based Ultrabook release. This segment is still in an early adopter’s stage.”

Market research firm IDC published slightly more grim figures for PC shipments in the United States. According to IDC's Worldwide Quarterly PC Tracker, the PC market shrank 10.6 percent in the second quarter, faring worse than the firm's initial forecast of a 4.4 percent decline.

According to David Daoud, research director, personal computing at IDC: "The U.S. market suffered a double-digit contraction in the second quarter as market saturation and economic factors combine with anticipation of Windows 8 and other changes later in the year. In this context, consumers are delaying purchases, and vendors and retailers are slowing down their PC activities to clear existing inventories. The situation is exacerbated by consumer notebook saturation, a slowing replacement cycle in the commercial sector, and the big macro-economic and political events affecting confidence and spending. We don't expect PCs using Windows 8 to boost growth significantly until the fourth quarter, which leads to a conservative outlook for the third quarter."

By IDC's reckoning, among the top-5 manufacturers, only Lenovo saw growth in the second quarter in PC shipments in the United States.

  • Market share leader HP was off 12 percent, ending at 4.13 million units shipped in the United States in the second quarter, according to IDC.
  • No. 2 Dell was off 9.2 percent, ending at 3.59 million units.
  • Apple, in third position, dropped 1.1 percent on 1.8 million units.
  • Unlike Gartner, IDC placed Lenovo in its top 5. In fourth position, Lenovo saw a 6.1 percent increase in shipments to 1.28 million units.
  • No. 5 Acer was off 14.3 percent at 1.25 million units in Q2 2012.

By IDC's reckoning, worldwide PC unit shipments fell 0.1 percent to 86.73 million units--results similar to those reported by Gartner.

Chart: Top 5 Worldwide PC Vendors, Market Share (unit shipments)Description: Source: IDC Worldwide Quarterly PC Tracker, July 11, 2012

"These latest results validate IDC's expectation that the second quarter would be a transition period where both economic factors and anticipation for new products in the second half of the year would result in relatively low PC shipment growth," said Jay Chou, senior research analyst, Worldwide PC Tracker, in a prepared statement. "The announcement of a Windows 8 launch date, as well as broader communication of new features in the OS, are key steps that would help to address uncertainty about new product availability and help consumers and channels plan their purchases."

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