HP bounces back indecision PC business

Hewlett-Packard is showing signs of recovery as it strengthened its position as the world's largest maker of personal computers and gained back some of the business it had lost while weighing whether to dump its PC division. HP's stock jumped more than 7 per cent on Thursday, after research groups Gartner and IDC released their PC shipment estimates for the first three months of the year. HP was the best performer in the Dow Jones industrial average. HP is in the midst of a turnaround effort under a new chief, former eBay CEO Meg Whitman. Her predecessor, Leo Apotheker, wanted to sell or spin off the PC business, a plan that contributed to his exit in September after 11 months on the job. Whitman decided a month later to keep the unit, despite the growing competitive challenge the PC industry faces from smartphones and tablet computers. The company lost market share during that period of uncertainty. With PCs increasingly commoditised, customers were free to choose a rival and avoid wondering whether HP would be around to offer product support in a few months. According to IDC, HP's worldwide market share dropped to 16 per cent in the fourth quarter, after HP signalled in mid-August that it might shed the PC business. HP's share had been nearly 18 per cent earlier in the year. IDC estimated late on Wednesday that HP's worldwide share in the first quarter of 2012 was back to 18 per cent. In the US, IDC said, HP's first-quarter share was 28 per cent, nearly back to what it had been last summer. In the holiday quarter, it had dropped to about 23 per cent. Analyst Brian G. Alexander at Raymond James said on Thursday that the numbers suggest the fallout from HP's indecision had eased. He also said they "add support to our view that HP is not a broken company." The worldwide market share for Lenovo Group fell slightly to 13.4 per cent, from 13.6 per cent in the fourth quarter. But Lenovo was strong compared with a year earlier. First-quarter shipments rose 44 per cent from the same period in 2011, when market share was less than 10 per cent and Lenovo was fourth rather than second among PC makers. The third-largest PC maker, Round Rock, Texas-based Dell, saw market share drop slightly in the first quarter to 11.6 per cent, from 12.5 per cent in the previous quarter. Shipments fell 2 per cent from a year earlier. Alexander said HP's gain was Dell's loss. "Results suggest that Dell was previously able to capitalise on the uncertainty surrounding HP's [PC] division," he said in a research note. "Now that HP has apparently stabilised, and Lenovo is firing on all cylinders, Dell has additional headwinds." Another analyst, however, said other factors may be involved. Keith Bachman at BMO Capital Markets said HP may have won back market share by cutting prices, a move that reduces profits, while Dell may have ceded market share to focus on the higher-end, higher-profit PCs. In a statement, Dell said its strategy has been to balance growth and profitability by focusing on "differentiated, higher-value solutions, rather than participating in lower-margin business simply for unit-share sake." Besides the flip-flop over PCs, Palo Alto, California-based HP has struggled with internal management problems, including a complex supply chain that reduces efficiency. Gartner said HP's growth in the first quarter suggests that those internal issues were resolved, though Whitman has described the turnaround as a multiyear effort. Last month, HP announced plans to combine its PC and printers divisions to cut costs and improve operations. Despite the gains, HP and other PC makers still face a broader challenge from the growing demand for mobile devices. In the US and other developed markets, consumers have been delaying PC replacements and buying the latest phones and tablet computers from Apple and others instead. Late Wednesday, Gartner said worldwide shipments of PCs increased 1.9 per cent in the first quarter, compared with its earlier expectations of 1.2 per cent. IDC said shipments were up 2.3 per cent, better than a projected decline earlier of 0.9 per cent. But those gains were small compared with the double-digit percentage growth PC makers enjoyed before the tablet boom. IDC expects PC shipments will pick up late in the year as Microsoft releases a new version of its Windows operating system, one that is designed for both PCs and tablets. From gulfnews