Hewlett-Packard (HPQ) launched new Windows-based products last week, which include ultraportables, stylish notebooks, and two desktop PCs. The latest products also included a hybrid notebook-tablet product called the Envy X2 tablet-laptop. At first glance, it resembles a netbook with a keyboard base and an 11.6 inch touch display. But the device turns into a tablet once the screen is detached from the base. There have been no specific details yet on these new product lines and technology enthusiasts will have to wait until HP's further announcement.
The company is doing its best to introduce new products to increase its market share. Based on the Canalys report, Apple (AAPL) posted a market share of 19.4% for the second quarter of 2012. It dislodged former market leader HP who garnered a 12.5% market share for the same period. This is also a reversal from the previous quarter's market share report. HP regained its top position in the first quarter after shipping 400,000 more client PCs. On a year-on-year basis, Apple gained 59.6% compared to the prior period. Conversely, HP experienced a decline of 11.3% from the prior year. Apple's market share gain is due to strong iPad sales. This helped Apple secure approximately 19% of global PC shipments. On the other hand, HP's decision to merge its PC and printing divisions have somewhat affected its performance. This might be a short term pain for HP but appears a long-term benefit for the company.
Better Products to Counter Falling PC Sales
Aside from the hybrid tablet-laptop, it will also feature HP Pavilion Sleekbook, Pavilion and Sleekbook 15 PCs. The Pavilion Sleekbook with 14 and 15 models will feature 14-inch and 15-inch displays, respectively. These laptops will carry Advanced Micro Devices (AMD) accelerated processors and Intel (INTC) core processors. Sleekbook 14 will start at $500 and Sleekbook 15 pricing starts at $600.
Another competitor, Dell (DELL) has unveiled its Windows 8 latitude tablet and Ultrabook for business. Its Windows 8 tablet will be targeting education, healthcare and government markets. Meanwhile, the Windows 8 Ultrabook will be a 14-inch notebook and is designed to meet military testing. This means that it has additional useful extra specs such as a spill-resistant keyboard and free-fall hard disk sensor. These laptops will also run on Intel core processors.
These new products will run on Microsoft's (MSFT) Windows 8 operating system. The Windows 8 platform is expected to be launched next month. Industry pundits are on the fence while waiting to see how the platform will regain Microsoft's competitive position. Consumer behavior has definitely shifted from a central PC system to a wide array of mobile devices. The Windows 8 platform is Microsoft's answer to this concern through collaboration capabilities that addresses the spread of mobile devices. There are concerns that Windows will suffer the same fate as Vista, a platform which never gained success in the corporate environment. It eventually died a natural death and redeployed Windows 7.
For the last fiscal year, desktops and notebook PC sales declined by 0.7% and 3.2%, respectively. This is a reversal from the previous year's increase of 7.5% and 6.7%, respectively. This is the same fate as Dell. Dell's desktops and mobility has also decreased from 61% of revenues in 2008 to 54% in 2011. It seems that this phenomenon is industry-wide. But, it's not as bad as expected. In fact, analysts have predicted better than expected growth for the PC industry.
The worldwide PC market is expected to grow by 5% year-on-year to 383 million units. This is relatively better results despite a tough operating environment. The industry faces significant headwinds such as intensified competition from alternative mobile devices, as well as global economic and political uncertainty. Majority of the growth is attributed to the faster than expected economic recovery from the hard disk drive supply. Going forward, the figures are expected to grow from 364.5 million units sold in 2011 to 528.5 million in 2016. This is an increase of 8.99% for the same period.
It seems that industry experts are still optimistic about the PC market in the future. HP's Todd Bradley said that there is still strong demand for PCs as they are very much needed in our daily lives. Also, he said that there is a growing role for tablets, and expects HP to be a significant force in the space. With this, I believe that the PC will continue to post growth albeit at a slower pace. As long as HP develops new products that will address the consumer needs, it will still remain a dominant force in the industry.
The good news is that HP's new products are not limited to PCs alone. It has recently launched a web-enabled browser that targets publishing houses. Aside from this product, it has extended the scope of its customer communications solution, HP Extreme. It added special features like SmartVideo and digital mailbox, which allows users to share video content via emails. The digital mailbox will also assist firms offer their customers personalized email accounts with capabilities such as printing files, receiving alerts and reminders.
Overall, these new offerings will definitely act as catalysts that will turn around HP's operations. It has been more than a month since Meg Whitman announced the company's path to profitability. I believe that the path will be focusing on new products that will cater to customers. These products should definitely have a fighting chance in a commoditized PC world. Cutting down its costs has a limit and would dampen its workforce morale in the long term.
The stock has already lost more than 25% for the last 6 months. It is currently trading 4 times forward earnings and 1.1 times book. It also carries a dividend yield of 2.9%. Microsoft trades at 9.4 times earnings and 3.9 times book value. Dell trades slightly higher at 4.9 times earnings and 1.8 times book.
For now, the market isn't as convinced as HP's CEO. It would take a while before the market can put a premium on a market leader in a tough economic environment. Even if the economy picks up speed, it still needs to convince the market that it can generate profitability as it did in the past.