Investors tend to forget that some of the world largest PC companies are based in China, lead by Lenovo and Acer. The two companies run behind Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) in global market share. But, that may be changing in a way that the two US companies will find unpleasant.
Research firm Gartner looked at PC sales around the world during the third quarter. According toReuters, "Overall, worldwide PC shipments rose 15 percent from last year to 80.6 million units." To no one's surprise, growth in the US was slower, up 4.6%.
HP's global market share was 18.4% and Dell's was 13.6%. Acer rose to 12.5% making it the most improved of the three compared with last year.
Acer's secret is that it is selling netbooks, small PCs which usually cost under $500. Analysts have questioned whether consumers would want these because smartphones have many of the same functions. Acer has taken the gamble of ramping up production, a potentially risky move if the customers were not out there. The decision is giving them a chance to steal a march on the larger rivals.
The Acer move may say as much about what is wrong with US PC companies as its says about what is right at Acer. There are many people, especially in emerging markets, who are not likely to be able to spend $1,000 on a computer. And, the mobility of the US PC user is improving with the success of WiFi and 3G.
Dell and HP should be concerned every time they see someone walking down the street with a netbook. It has probably been sold to them by a competitor.
JP Morgan downgraded big China-based PC maker Lenovo. According to Reuters,the brokerage cut Lenovo "to neutral from overweight due to a near-term slowdown in revenue growth from weak China demand and a slower ramp-up of the U.S. consumer business."
That is not exactly good news for U.S. PC companies Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ) that already appear to be losing market share to the Apple (NASDAQ: AAPL) Mac. China is a critical market to both companies, and any sign of further stress in the U.S. market does not leave them many regions to make up for faltering demand.
Wall Street is already concerned that a recession in the U.S. and slowing economies abroad will hammer the PC market. Like most American companies, HP and Dell thought they could always rely on the rapidly expanding markets in Asia.
It turns out that the best laid plans are not working out.
Douglas A. McIntyre is an editor at 247wallst.com.
PC manufacturers never let a moment pass up where they can seemingly one-up the competition by using meaningless marketing claims. The "World's Fastest" and "World's Most Secure" taglines are so hokey that it's amazing we all don't buy PCs at the local flea market. So, when Dell, Inc. (NASDAQ: DELL) recently said that it made the "World's Most Secure Notebooks." Chinese competitor Lenovo had a problem with that. What exactly does that claim mean, anyway?
This isn't the first time for a meaningless claim to be used in PC land. Sure, one of Dell's systems may be the "World Most Secure" in a certain environment with a certain arrangement of software, but to use that implied moniker to describe your entire product line is ridiculous. Apparently, consumers and business decision makers believe these pitches of manufacturers. The funny thing is that it makes sense for all PC manufacturers to use illegitimate claims. Why? Because the PC industry is a commodity one. What else is there to differentiate products?
No matter how much PC company CEOs harp on "we're better at this, we're better at that," it doesn't matter. Almost all PCs are like a gallon of milk; you choose one and you move on. Service options after the sale are the differentiators, not the hardware that was most likely made by one of a handful of Asian contract manufacturers anyway. Even the high-and-mighty Apple, Inc. (NASDAQ: AAPL) has been accused of using claims that sound too good to be true, such as "the world's fastest, most powerful personal computer" -- to which Dell promptly complained.
Remember Goldstar, the inexpensive color televisions brand popular in the 1970s and '80s? Those televisions were manufactured by a South Korean firm called Lucky Goldstar, founded after WWII to make appliances and chemicals. Today, that company is known as LG, one of the largest conglomerates in the world, famous for its high quality phones and plasma televisions. And soon it may be the owner of General Electric's (NYSE: GE) appliance business.
GE announced two weeks ago that it might sell its appliance unit. BusinessWeek and The Wall Street Journal are reporting today that LG is watching the GE situation very carefully. GE wants to exit the appliance business due to intense price competition from manufacturers in Asia. The New York Timesspeculated that the transaction would be similar to IBM's sale of its computer brand to Lenovo a few years ago. The purchaser would have a few years to continue using the GE badge before going solo with its own brand.
Based in Kentucky with 13,000 employees, the appliance division is one of GE's oldest and a real piece of Americana. Founded in 1907, it invented a number of everyday products, including the room air-conditioner and the toaster oven. However, it suffers from low growth rates and contributed 'only' $7 billion to GE's revenue last year, out of $173 billion total. Analysts think it could bring in $5 billion in a sale.
GE has plenty of high growth businesses in transport, medical imaging and energy, so selling its appliance business makes sense in some calculations. But I don't know -- somehow buying a refrigerator or microwave won't be the same. Yet another chunk of American manufacturing muscle is being shipped overseas, and I wonder what the country will do when virtually all of its basic production capacity sits in other countries.
Lenovo Group Ltd. (OTC: LNVGY), which purchased IBM Corp.'s (NYSE: IBM) personal computer assets years ago, reported an outstanding financial quarter of this week. The Chinese company saw dramatic shipment increases into emerging markets as well as the Americas (even with weak demand in the U.S.). Shipments grew the fastest in the European region, with a 30% growth rate from the year-ago period.
Lenovo is behind Hewlett-Packard Co (NYSE: HPQ), Dell, Inc. (NASDAQ: DELL) and Taiwan's Acer in terms of global PC sales, but don't tell it that. The company's fourth-quarter profit more than doubled to $140 million from the $60 million year-ago quarterly figure. In the PC industry, that's a jump extraordinaire. Although the PC industry's growth rose 15% in the company's latest quarter, Lenovo topped that with an overall growth figure of 21%.
This is even more startling considering that Lenovo exports quite a bit to the U.S., which is in the midst of a consumer and business spending slowdown. This is where it comes in handy to have your sales dispersed in such a way that one region of the world doesn't make or break your company. This is the fruits Lenovo is enjoying at the moment, as it has a very evenly distributed sales mix in every global region. Meanwhile, 60% of Dell's 2007 sales came from the Americas only -- and we wonder why the company's sales have faltered.
Usually, when sovereign funds put money into a company it is simply a financial investment. Dell (NASDAQ: DELL) may have unlocked something more. According toThe Wall Street Journal: "Dell said it is in talks with a government-owned entity in Dubai about establishing a joint venture to further increase the personal-computer maker's sales in the Middle East." In other words, the computer company will get value well beyond cash.
For Dell, it is a brilliant move that shows government funds can do more than just write checks. The PC market in the Middle East is large and growing very rapidly.
The US company may have found a template for improving its market share around the world through forming joint ventures with local pools of capital. Dell's growth in many markets has been hurt by the improvement of share by Hewlett-Packard (NYSE: HPQ), and the rise of big computer companies Lenovo and Acer out of China. All of these companies need to improve their business in growing markets, like the Middle East and Asia, if they want their earnings to move up.
If the Dell venture in Dubai works, it would be wise to look to sovereign funds in Russia, China, and Singapore for similar deals. Dell's market share in many of these regions is in trouble. Who better than the locals to help them?
Big China PC company Lenovo did something that Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ) won't. According toReuters, it "beat expectations by nearly tripling quarterly earnings, riding strong demand for PCs in Asia."
Lenovo would like to get into the business of selling more PCs in the US, but it may be lucky that it does not have too much exposure here. The company gets about 40% of its revenue from China.
The news is a reminder that US PC companies may have a hard time this year. While they sell PCs overseas, they do not have a dominant position in the world's most populated country. In the US and Europe they are up against a resurgent Apple (NASDAQ: AAPL) and products from Taiwan PC company Acer.
Lenovo may do well this year. US PC companies are another matter.
Douglas A. McIntyre is an editor at 247wallst.com.
It used to be that all tech companies wanted big footprints in the US market. Asia-based PC firms, lead by Lenovo and Acer, have been trying to get into America for years. Their efforts have been hurt by big domestic operators, especially Hewlett-Packard (NYSE: HPQ), Dell (NASDAQ: DELL), and, more recently, Apple (NASDAQ: AAPL).
Perhaps it is lucky for Lenovo that its efforts here have not worked out so well. It is set to announce profits which will be double what it did last year in the same quarter. The company should have a better year than its US rivals because of its strength in China and the rest of Asia.
"The biggest concern is the slowdown in the PC market this year, but Lenovo is best-positioned within the sector since it has the least exposure to the US market," said CLSA analyst Jenny Lai, quoted byReuters.
The news also underscores that fact that US PC companies are still behind where they would like to be in Asia. This is especially true of Dell, which is only now making deals with retailers in the region to sell its PC.
For once, having trouble getting into the US market may be a blessing.
Douglas A. McIntyre is an editor at 247wallst.com.
Chinese PC maker Lenovo has seen its shares take a slide on concerns that a slowing US economy could hurt computer sales. Oddly, the US is not Lenovo's largest market, not even close.
Lenovo shares "dived more than 14 percent on Wednesday after a broker cut the Chinese firm to sell on growing fears of a US recession," according toReuters. Lenovo would like to be a major force in the US PC market, but most of its sales are in Asia.
Concerns about Lenovo's prospects in the US make the fortunes of Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL) look even worse. Dell shares are back at a 52-week low of about $20. The return of the company's founder has done nothing for shareholders. The mighty HP, which has outperformed most tech stocks over the last two years, has traded off 16% over the last month.
The question for all of the PC companies is whether the consumer will delay purchases of $1,000. While car sales, at $25,000 a pop, may be set-back along with sales of houses, smaller ticket items might make it through a mild recession. Corporations may also be willing to continue upgrading their PC supplies.
News of the death of PC sales may be premature. New models and attractive prices could keep computer sales in positive territory.
Douglas A. McIntyre is an editor at 247wallst.com.
Oddly, China's Lenovo and Taiwan's Asustek and Acer are looking for growth in the laggard market of the PC industry -- the U.S. PC sales are increasing more than two times the growth rate in the U.S. when it comes to many Asian countries, and one would think that following the growth would be a more important priority for manufacturers in a commodity industry. Not so.
U.S. sales may have some margin to give back to manufacturers (as in, profit margin) by grabbing hold of the U.S. consumer with sizzling and stylistic designs and winning them over with an experience instead of a boring black box or laptop with the normal disposition of a toaster oven.
Add to that the fact laptop sales are growing in a large way as consumers dump those desktop PCs for those portable, wireless PCs, and it's no surprise Chinese and Taiwanese manufacturers want most of those newer laptops sold in the U.S. to be their brands and not Apple, Inc. (NASDAQ: AAPL), Dell Inc. (NASDAQ: DELL) or Hewlett-Packard Company (NYSE: HPQ).
Lenovo, the Chinese PC company, is known for producing good laptops for businesses. But with Mac sales moving up sharply, going after Apple (NASDAQ: AAPL) seems too hard to resist.
According toThe Wall Street Journal, "As with many of its competitors, Lenovo is emphasizing design and style, and trying to turn notebooks into fashion accessories that reflect individual personality." Dell (NASDAQ: DELL) and HP (NYSE: HPQ) are also coming out with fancy, feature-full PCs.
The problem, of course, is that the field for Mac-like computers will become crowded very quickly. That leads to the question of whether the PCs will be able to get some market share from the Mac or actually just compete with one another.
The success of the new computers will depend on several things. One is whether consumers are willing to use Microsoft (NASDAQ: MSFT) Vista over the Apple OS, which has gotten very good reviews. Another is whether the new PCs can match most of the attractive design features of the Mac.
But the most important factor may be price. If PC manufacturers can bring most of the Mac's features to market for several hundred dollars less per machine, then they have a chance.
Douglas A. McIntyre is an editor at 247wallst.com.
The media is making much of Apple, Inc. (NASDAQ: AAPL)'s move above $200 and it is a nice milestone. What is much more impressive is that about 20 months ago, the shares were only a bit above $50.
The question for Apple investors now is not how far the stock has come, but whether it can continue the trip. The company is now burdened by expectations which did not exist two or three years ago.
The assumptions on which a continued rise in the stock are based see the iPhone becoming a significant player in the smartphone market, the iPod continuing to sell tens of million of units a year, and the Mac getting well beyond 5% of the global PC market.
The Mac goal may be more difficult than the others. With over a billion handsets sold a year worldwide, the thought that the iPhone could capture 20 million units a year is not extraordinary. And, with a dominant position in the multimedia player market, the iPod is likely to have long-term growth so long as consumers want music and video to go.
But, the computer market is a much tougher nut. Hewlett-Packard Company (NYSE: HPQ), Dell Inc. (NASDAQ: DELL), and Asia manufacturers Lenovo and Acer, are not going to give up the share that they have now, at least not without cutting costs and improving features. Apple may not be able to hold the high-priced end of the market forever.
If Apple stumbles, it is likely to trip over expectations for the Mac.
Douglas A. McIntyre is an editor at 247wallst.com.
As the seasons roll around so do the quarterly PC sales numbers from research firm Gartner. It will be a chilly fall for Dell (NASDAQ: DELL) In the third quarter, the Texas-based PC company shipped 9.8 million PCs. That was an increase of less than 4% over the same period last year, and gave the company 14% of the global market, according to The Wall Street Journal.
By way of contrast, Hewlett-Packard (NYSE:HPQ) shipped 12.8 million PCs world-wide, enough for 19% of the market and a 33% increase from the year earlier period.
Ouch.
It would appear that HP is going to report especially strong PC sales when it releases its third quarter earnings. Its shares are already at almost $53, near their 52-week high.
But the numbers raise serious questions about Michael Dell's chances of turning around the company that he founded. He has put his PC into retail outlets, which should help sales over time. But he is still competing with smaller companies like Acer and Lenovo, who are anxious to increase sales in Europe and the US.
Dell's shares are up almost 15% over the last six months. But if the Q3 sales numbers are reflected in its earnings, the improvement could be short lived.
PC manufacturers never let a moment pass up where they can seemingly one-up the competition by using 
Remember Goldstar, the inexpensive color televisions brand popular in the 1970s and '80s? Those televisions were manufactured by a South Korean firm called Lucky Goldstar, founded after WWII to make appliances and chemicals. Today, that company is known as LG, one of the largest conglomerates in the world, famous for its high quality phones and plasma televisions. And soon it may be the owner of 
Usually, when sovereign funds put money into a company it is simply a financial investment.
Big China PC company Lenovo did something that 
Not only is 
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