Popular iPad cutting into computer sales
The iPad is wreaking havoc on the personal-computer market.
Hewlett-Packard Co.'s consumer PC sales plunged 23 percent last quarter, and the company lopped $1 billion off its annual sales forecast. And while rival Dell Inc. beat analysts' estimates because of corporate demand, its sales to consumers slumped 7.5 percent. More than 70 million tablets like the Apple Inc. iPad will be sold in 2011, a total that will balloon to 246 million in three years, according to Jefferies & Co.
"You're walking into a buzz saw," Jane Snorek, a senior research analyst at Nuveen Asset Management in Milwaukee, said of the iPad. Her firm manages more than $200 billion in assets. "The tablet is going to replace at least the home computer."
At 7.3 inches across, with a color screen and an array of popular downloadable games like Angry Birds, applications for watching movies and reading magazines, and software for word processing and spreadsheets, the iPad has siphoned off more PC sales than analysts and executives predicted.
Apple, based in Cupertino and run by Steve Jobs, sold 4.69 million iPads last quarter, for a total of about 20 million since the device was released in April 2010.
The PC market, by contrast, declined last quarter. Global shipments fell 3.2 percent, hurt in part because some people bought tablets instead, research firm IDC reported last month.
While rivals including Research In Motion Ltd., Motorola Mobility Holdings Inc. and Samsung Electronics Co. have begun selling tablets, those have yet to gain wide acceptance.
The lack of viable competitors was felt across the PC industry in the first quarter. Microsoft Windows sales fell 4.4 percent to $4.45 billion. Its net income of $5.23 billion was eclipsed by the $5.99 billion reported by Apple, which topped its rival in that measure for the first time in 20 years.
At Intel, whose processors run more than 80 percent of the world's personal computers, growth in the PC-chip division came mainly from emerging markets and corporate sales.
Hewlett-Packard, the top PC maker, on Tuesday cut 20 cents per share from its annual earnings forecast, to $5, excluding items. The revised outlook sent the shares tumbling 7.3 percent on the New York Stock Exchange on Tuesday and left the stock down 12 percent since the last business day before Léo Apotheker took over as chief executive officer on Nov. 1.
"Léo comes in just as the tablet is taking off, and the consumer PC market is waning," Snorek said.
In a conference call Wednesday, Apotheker bemoaned a "bifurcated" PC market, where companies are spending and consumers aren't. Sales in the company's personal systems group fell 5.4 percent to $9.42 billion last quarter.
At Hewlett-Packard, full-year sales will be $129 billion to $130 billion. In February, HP had predicted full-year sales of $130 billion to $131.5 billion and earnings of at least $5.20 per share. Third-quarter forecasts from HP also missed analysts' estimates.
Dell was able to top estimates with its quarterly results Tuesday because of demand from businesses. Its sales to consumers fell partly because of competition with the iPad and other tablets, said Brian Gladden, chief financial officer of the Texas company.
"It's clearly a topic of discussion and it's a factor that's impacting the weak consumer demand," he said in an interview.