Investors dump Microsoft, PC stocks on bleak news (Update)

April 11, 2013 by Michael Liedtke

If fewer people are interested in buying a new personal computer, then fewer investors want to own stakes in companies whose fortunes are tied to the sales of laptop and desktop machines.

That logic ruled Thursday as Wall Street reacted to fresh evidence that PCs are turning into a dying breed of technology as consumers and businesses embrace smartphones and tablet computers as their preferred computing devices.

The stocks of PC software maker Microsoft Corp. and PC maker Hewlett-Packard Co. absorbed significant hits on the news that PCs suffered an unprecedented sales decline during the first three months of the year. Other companies connected to the PC industry, such as Intel Corp., also were affected, although not to the same degree as the industry bellwethers.

Microsoft's stock fell $1.35, or 4.4 percent, to close at $28.93, while HP's shed $1.44, or 6.5 percent to finish at $20.88. Intel shares decreased 43 cents, or nearly 2 percent, to $21.83.

First-quarter shipments of PCs plummeted by 11 percent to 14 percent from a year earlier, according to separate estimates issued late Wednesday by Gartner Inc. and International Data Corp.

By either measure, it was biggest decrease recorded by either research firm since they began tracking PCs sales. For IDC, the data goes back to 1994—just before Microsoft released a revamped PC operating system called Windows 95, which played a major role in triggering a sales boom that turned laptop and desktop machines into a household staple.

Microsoft hoped to revive PC demand last year with the debut of the most dramatic makeover of Windows since the 1995 redesign. The changes imbued Windows with some of the qualities of mobile software, including touch-screen controls and a display of applications in a mosaic of interactive tiles.

Although Microsoft says it's happy with the more than 60 million copies of Windows 8 that have been sold since its October release, analysts have been disappointed.

In its report, IDC blamed Windows 8 for accelerating the sales decline by confusing too many people who had become accustomed to using the old operating system. Another problem: The PCs designed to run on Windows 8 are coming in a befuddling array of styles and are demanding significantly higher prices than older models, at a time when the initial out-of-pocket expense for a smartphone is as low as $99 and tablet computers go for less than $200. In a sign of how sensitive consumers have become to prices, Inc.'s top-selling laptop is a $249 Samsung laptop running a new operating system based on Google's Chrome Web browser.

Count Sterne Agee's Shaw Wu among the analysts worried about the future of Microsoft and its partners in the PC industry. "We frankly believe (Microsoft's) strategy of forcing user interface changes that nobody wants has proven to be a disaster," Wu wrote in a Thursday research note.

Nomura Securities analyst Rick Sherlund also took a dimmer view of Microsoft's future prospect as he lowered his recommendation on the company's stock from a "buy" to "neutral." In a Thursday note, Sherlund asserted that about half of all consumers now see little reason to buy a PC or any other device running on Windows.

Microsoft may try to lure back consumers by offering less expensive devices.

The company, which is based in Redmond, Washington, is now developing a smaller version of its Surface tablet to compete with similar-sized devices made by Apple Inc., Google Inc. and Inc., according to a report in The Wall Street Journal, which cited anonymous people familiar with the matter. A Surface tablet with a 7-inch (17.5-centimeter) screen could hit the market this year, the Journal said.

Microsoft declined to comment Thursday.

Analysts say sales of the Surface with a 10.6-inch (27-centimeter) screen have been sluggish, despite an expensive marketing campaign.

Sherlund questioned whether Microsoft will ever pose a serious threat to Apple's iPad, Google's Nexus, Amazon's Kindle Fire and a variety of other tablets running on Google's Android software. "If the need is just for a tablet, Microsoft is not the first or second choice in the market and Windows 8 does not change that dynamic," Sherlund wrote.

HP, the world's largest PC maker, has been suffering sales declines with the rest of the market. Its PC shipments plunged by 24 percent in the first quarter. The company, which is based in Palo Alto, California, had been hoping to bounce back with the release of Windows 8. With those hopes dashed, HP is now making a laptop that runs on the Chrome operating system. CEO Meg Whitman is also trying to expand the company's more profitable businesses, such as business software, data analysis and consulting.

Intel, whose chips are in 80 percent of the world's personal computers but a laggard in mobile devices, is hoping to boost its revenue with a new line of microprocessors better suited for tablets and lightweight laptops. Among other things, the new chips consume less power so battery life lasts longer—an increasingly important factor in an era of mobile devices.

Explore further: Intel warns 3Q revenue will drop on PC weakness (Update)


Related Stories

PC sales got no boost from Windows 8

November 29, 2012

Sales of personal computers in the U.S. didn't get any boost from the launch of Windows 8, confounding the hopes of Microsoft and PC makers, research firm NPD Group said Thursday.

PC sales plunge as Windows 8 flops (Update 2)

April 10, 2013

Two somber new reports show unprecedented declines in desktop and laptop sales during the first three months of the year—signs that the personal computer market may never fully recover from a new generation of mobile devices.

Analysts, PC industry cool on Windows 8

October 17, 2012

While Microsoft is touting next week's launch of Windows 8 as the savior of the computer industry, PC makers and analysts are increasingly skeptical that the new operating system will lure consumers away from tablets and ...

PC sales fall by 6 pct to 11 pct in US during 2Q

July 12, 2012

(AP) — U.S. personal computer sales sagged during the spring as shifting technology trends, upcoming product releases and a shaky economy dampened demand for the machines currently on the market.

Recommended for you

A not-quite-random walk demystifies the algorithm

December 15, 2017

The algorithm is having a cultural moment. Originally a math and computer science term, algorithms are now used to account for everything from military drone strikes and financial market forecasts to Google search results.

US faces moment of truth on 'net neutrality'

December 14, 2017

The acrimonious battle over "net neutrality" in America comes to a head Thursday with a US agency set to vote to roll back rules enacted two years earlier aimed at preventing a "two-speed" internet.

FCC votes along party lines to end 'net neutrality' (Update)

December 14, 2017

The Federal Communications Commission repealed the Obama-era "net neutrality" rules Thursday, giving internet service providers like Verizon, Comcast and AT&T a free hand to slow or block websites and apps as they see fit ...

The wet road to fast and stable batteries

December 14, 2017

An international team of scientists—including several researchers from the U.S. Department of Energy's (DOE) Argonne National Laboratory—has discovered an anode battery material with superfast charging and stable operation ...

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

4.5 / 5 (2) Apr 11, 2013
Some of the tech firms, both hardware and software, need to diversify their operations.

How many versions of Windows, Excel, and Word can Microsoft hope to sell? They've solved those problems and optimized them 10 years ago. Do something else.

Besides, there must be something useful to do with a computer besides play video games and check your email.

I certainly hope they don't quit making the PC, as I like the PC more than existing smartphones. If the smartphones were slightly larger, so the interface wasn't so tedious, and if the carriers weren't so asinine and greedy, then it might be otherwise.

I certainly wouldn't want to try to type this post on a smartphone, and I sure as hell wouldn't want to try to type something like a thesis on a smartphone or tablet.

I really like my 20 inch monitor vs a 4 or 5 inch display, even though the aspect ratio is a bit annoying.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.