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Tech Sector Bloody as PC Sales Vanish

April 11, 2013 10:46 AM EDT
Tech stocks like HP (NYSE: HPQ) and Microsoft (NASDAQ: MSFT) are under heavy pressure Thursday following weaker-than-expected PC data, which analysts said indicates faster erosion as tablets continue to take market share.

Worldwide PC shipments totaled 76.3 million units in the first quarter of 2013, down 13.9% compared to the same quarter in 2012 and worse than the forecast decline of 7.7%, research firm IDC said. The year-on-year contraction marked the worst quarter since IDC began tracking the PC market quarterly in 1994.

IDC in part blamed a weak reception for Windows 8. "At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said Bob O'Donnell, IDC Program Vice President, Clients and Displays. "While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market."

In response to the news, analysts at Goldman Sachs downgraded Microsoft (NASDAQ: MSFT) to Sell, saying the issue from a lack of traction in smartphones/tablets is just too large to ignore. Shares of Microsoft are down 4.6 percent. The company was also downgraded from Buy to Neutral at Nomura.

HP (NYSE: HPQ) is down 5.6 percent as IDC data showed that its worldwide shipments fell more than 23% year on year in the first quarter. While HP remained the top vendor in the U.S., shipments fell 22.9% from a year ago in the region.

Dell (NASDAQ: DELL) is fairing a little better given the pending takeover deal. Still, Dell saw shipments decline by more than 10% globally and 14% in the United States. The worse-than-expected data could dissuade a higher offer. Shares are down 0.53% but remain above Michael Dell's $13.75 per share offer.

The weakness is going beyond the PC software and hardware makers. Semiconductor companies and hard drive makers are also weak. Intel (NASDAQ: INTC) is down 2.5%, Seagate Technology (NYSE: STX) is down 3.8% and Western Digital (NYSE: WDC) is down 2.4%.

Looking at sector ETFs, Technology Select Sector SPDR (NYSE: XLK) is down 0.4%, iShares Dow Jones US Technology (NYSE: IYW) is down 0.8%, and Market Vectors Semiconductor ETF (NYSE: SMH) is up 0.08%.


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