Apple takes the biggest hit as global computer shipments dive
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Global shipments of personal computers slumped by nearly a third in the first three months this year, with Apple dropping the most among the market heavyweights as the industry struggles with a slowdown in consumer spending following the pandemic.
In separate reports, market research firms IDC and Canalys blamed weak demand, excess stocks, and a bleak economic outlook for the shipment declines of 29% and 33%, respectively.
"Most of the issues that plagued the industry in the second half of last year have extended into the start of 2023," Canalys analyst Ishan Dutt said.
Of the top five PC makers analysed in the reports, Apple saw the largest drop with a fall of more than 40%. That was followed by Dell with a drop of around 31%.
Lenovo, Asustek, and HP also faced declines, the reports said.
The data suggest that PC makers are set for another quarter of weak earnings after a 2022 that saw their sales squeezed by the end of the pandemic-driven demand boom.
The pause in demand and growth, however, is giving supply chains time to stabilise after a rocky two years and for companies to explore production options outside China, IDC said.
Both the research firms also predicted the market could start to recover later this year and gather momentum in 2024 if the economic outlook improves.
"We expect significant market upside as consumers look to refresh, schools seek to replace worn-down Chromebooks, and businesses move to Windows 11," IDC said.
But some analysts are less optimistic, considering the crisis in the banking sector.
"The evidence doesn't seem to support the idea that (the recovery) is going to happen," said Fox Advisors analyst Steven Fox, pointing to the widespread cost cuts across companies.
"We're not looking at a crash in demand from here. We're saying things are sluggish and are going to stay that way," he said.
Meanwhile, this year’s 20% rally in US technology stocks is decoupling from reality ahead of what’s predicted to be a gloomy reporting season, the latest MLIV Pulse survey shows.
While investors have flocked to tech in the market shakeup amid recent banking turmoil, the rotation is at odds with analyst calls for the steepest drop in quarterly profits for the sector since at least 2006.
Nearly 60% of the 367 respondents surveyed by said the bounce in the shares had nothing to do with earnings expectations.
“The tech outperformance is a bit overdone and we’re not chasing that indiscriminately,” Wei Li, global chief investment strategist at BlackRock, said in an interview. “It’s being driven by expectations the Federal Reserve will start cutting rates as a recession becomes evident, and not necessarily by company fundamentals.”
The report card for tech will be crucial for the overall market, since the S&P 500’s 7% gain in the first quarter has been mostly powered by a handful of the sector giants.
Analysts estimate US tech earnings plunged 15% in the three months through March, with companies hit by high costs and slowing demand.
Early omens don’t bode well, with broad layoffs in the industry signaling a slowdown.
The global information and communications giants such as Amazon, Google, Microsoft, and Facebook-owner Meta, had announced a total of global layoffs of 87,330 by the end of February, according to a report from the Central Bank of Ireland.
The report estimated that there were around 2,310 redundancies affecting Ireland because a large number of the tech giants have substantial operations here.
About a fifth of S&P 500 companies have issued guidance on first-quarter results in recent weeks, with three negative forecasts for every positive one, according to Aneeka Gupta, a director at Wisdomtree UK.
Tech stocks are also looking expensive. The Nasdaq 100 is trading at 24 times its forward earnings, well above its long-term average of 19 and the S&P 500’s multiple of 18.
- Reuters, Bloomberg, and the Irish Examiner