Troubled computing group HP has been usurped by Lenovo as the world's biggest selling PC maker, according to research released this week.
Global ICT insight group Gartner says Lenovo took the top position in worldwide PC shipments for the first time in the company's history, in the third quarter of the year. Lenovo now has 15.7% of the market, compared with HP's 15.5%.
New York Stock Exchange-listed HP has been under continuing pressure recently, and warned of an unexpectedly steep earnings slide next year, as revenue is expected to fall in every business division except software.
HP started a multi-year transformation in May in a bid to turn itself into a major enterprise computing provider. However, the company is facing a challenging time and is set to lay off 29 000 of its 300 000 employees in the next two years.
Battling
HP's latest figures - for the third quarter of the year - show it is falling behind in top line growth and slumped into a year-on-year earnings per share loss. President and CEO Meg Whitman said in August that the company was still in the early stages of its turnaround.
"We're making decent progress, despite the headwinds... During the quarter we took important steps to focus on strategic priorities, manage costs, drive needed organisational change, and improve the balance sheet. We continue to deliver on what we say we will do."
Reuters reports that revenue from all of HP's main business units fell in the July quarter, with the PC unit seeing a slide of 10%. Operating profit declined by 28% in the PC group, the largest slide among HP's divisions. The wire service notes that its saving grace is its printing division, which may buy Whitman more time to turn the mammoth company around.
Whitman expects the company's revenue to grow in line with gross domestic product, with operating profit growing faster than revenue, by 2016.
However, Reuters reports that its latest trading update, for the final fiscal quarter, left Wall Street unimpressed as it had expected the transformation into an enterprise computing corporation, which can take on IBM and Dell, to show faster results.
HP's Printing and Personal Systems unit has been focused on consolidating supply chain functions and shrinking from six sales teams to three, while reducing functional support organisations from 12 to seven. It will also trim the number of platforms in its PC range by a quarter in the next two years.
Surging forward
Conversely, Lenovo recently reported record full-year results and noted it started the fiscal period as the world's fourth-largest PC vendor, and ended in the number two slot. The results, released before Gartner's update, showed record sales of $29.6 billion and a record pre-tax income of $582 million.
Lenovo has not only acquired other vendors, but has taken an aggressive position on pricing, especially in the professional market, says Gartner. This gave it significant market share gains over the last two years, exceeding regional average growth rates across all regions, says the research firm.
A year ago, Lenovo moved into the number two slot for the first time, earlier research from Gartner shows. In the third quarter of last year, HP - still the number one vendor at the time - grew faster than the industry average, and its market share reached 17.7%.
Despite its mid-2011 announcement that it would spin off its PC unit, a move it has since backtracked on, it saw strong growth in the US, yet growth was relatively weak or average outside the States, Gartner said in October 2011.
Lenovo's move into number two for the first time was boosted in part by the joint venture with NEC in Japan, said Gartner. Its aggressive marketing to both the professional and consumer PC markets accelerated its shipment volume, the company notes.
Slowing down
Global PC shipments reached 87.5 million units in the third quarter of the year, an 8.3% year-on-year drop, said Gartner. "A continuing slowdown in consumer PC shipments played a big part in the overall PC market decline," notes principal analyst Mikako Kitagawa.
"The third quarter was also a transitional quarter before Microsoft's Windows 8 operating system release, so shipments were less vigorous as vendors and their channel partners liquidated inventory," says Kitagawa.
"Retailers were conservative in placing orders as they responded to weak back-to-school sales. By the end of September, retailers were focused on clearing out inventory in advance of the Windows 8 launch later this month."
Kitagawa notes that there was little impact from Windows 8 in the professional sector during the quarter, as the market is not expected to adopt the new operating system straight away.
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