The popular pastime in the high-tech investment arena is to state, re-iterate and re-re-iterate the idea that PCs are dying and traditional PCs will decline until the vanishing point is reached.
What if PCs (talking about x86 based computing devices here) were to surprisingly return to growth? Even a tiny bit of growth? Where does the "PC is declining" group go to hide to avoid the mugging by those who sold or didn't buy Intel (NASDAQ:INTC) based on their advice?
Meg Whitman, CEO:
"…..Revenue grew 4% over the prior year, our first quarter of growth in seven quarters. Growth was driven by strong performance in commercial, particularly commercial notebooks.
Operating margins for the quarter were 3.3%, up over both, the prior year and sequentially. The competitive pricing environment remains aggressive, which puts pressure on our gross margins. We are being selective in where we play, and as a result we lost 0.7 points of market share over the prior year in a declining market in the calendar fourth quarter, and 0.9 points, sequentially.
(So, the PC business grew YoY, yet HP lost market share… If HP grew while losing market share, what did the guys who gained market share do? Grew more I guess.)
Cathie Lesjak, CFO:
"……The performance in Personal Systems was better than expected with revenue of $8.5 billion, up 3.6% year-over-year, driven by commercial strength. There were signs of improved market conditions, especially in commercial PCs and we are confident about our portfolio and focus.
Although consumer sales declined 3% year-over-year, commercial sales grew 8%. Commercial notebooks grew double digits over the prior year period and commercial desktops were up as well.
Total unit shipments grew 6% year-over-year with growth in both, the Commercial and Consumer segments."
(So, unit shipments grew 6% YoY while losing market share. Interesting.)
Meg appears to be talking about the calendar fourth quarter of 2013, while Cathie appears to be talking about the HP fiscal quarter that includes November, December and January 2014.
Cathie indicates, at least to me, something of a surprising growth story of 6% in PC units, while Meg talks about losing some market share (.7% YoY).
If this strength continued for February and March, we should expect there could have been growth in the entire PC market in the first quarter of 2014, since HP was actually losing market share. If HP was losing market share and grew units by 6%, the total should be more than 6% growth.
Around the 10th of the month following the close of the quarter, IDC and Gartner trip over each other to report what they see as the PC market for the previous quarter. There is always some debate over what they include in the PC segment. Ummm, it's personal computers, it shouldn't be so difficult.
So, what if the PC market, in terms of x86 units, made a U-turn last quarter?
What if, when all the gives and takes are calculated, the x86 part increased, say… the 6% that HP said it did?
An announcement of a PC U-turn by ICD and Gartner would probably run the Intel stock price up a couple of bucks the next day.
More important is that the Intel first quarter guidance was predicated on a continuing minor shrink in PC sales. A 6% unit growth would imply a beat by Intel on revenue and earnings on April 15th. A beat of any magnitude would probably cause another couple of dollars bump in the stock…. at least.
Intel did report record unit shipments of i5 and i7 devices last quarter, apparently i3s were not a record, but I bet they were close.
I am up to my eyeballs in Intel and will be waiting with bated breath for the third party PC report around the 10th of April and then earnings on the 15th of April.
As always, place your bet and roll the dice. I hope this tidbit is a set of die that only turns up 7s for you.
Disclosure: I am long INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.