Consumers powering off desktop PCS
Investors dump stocks of firms linked to PC market after sales drop up to 14% Blackberry investor sticking by company Supplied by
by Michael Liedtke If fewer people are interested in buying a new personal computer, then fewer investors want to own stakes in companies whose fortunes are tied to the sales of laptop and desktop machines.
That logic ruled yesterday as Wall St reacted to fresh evidence that PCs are turning into a dying breed of technology as consumers and businesses embrace smartphones and tablet computers as their preferred devices.
The stocks of PC software maker Microsoft and PC maker HewlettPackard absorbed significant hits on the news that PCs suffered an unprecedented sales decline during the first three months of the year.
Other companies connected to the PC industry, such as Intel, also were affected, although not to the same degree as the industry bellwethers.
Microsoft’s stock fell US$ 1.35, or 4.4 per cent, to close at US$ 28.93, while HP’s shed US$ 1.44, or 6.5 per cent to finish at US$ 20.88. Intel shares decreased US43c, or nearly 2 per cent, to US$ 21.83.
First- quarter shipments of PCs plummeted by 11 per cent to 14 per cent from a year earlier, according to separate estimates i ssued on Thursday by Gartner and International Data Corp.
By either measure, it was the biggest decrease recorded by either research firm since they began tracking PC sales.
For IDC, the data go back to 1994 just before Microsoft released a revamped PC operating system called Windows 95, which played a major role in triggering a sales boom that turned laptop and desktop machines into a household staple.
Microsoft hoped to revive PC demand last year with the debut of the most dramatic makeover of Windows since the 1995 redesign.
The changes imbued Windows with some of the qualities of mobile software, including touch- screen controls and a display of applications in a mosaic of interactive tiles.
Although Microsoft says it’s happy with the more than 60 million copies of Windows 8 that have been sold since its October release, analysts have been disappointed.
In its report, IDC blamed Windows 8 for accelerating the sales decline by confusing too many people who had become accustomed to using the old operating system.
Another problem: The PCs designed to run on Windows 8 are coming in a befuddling array of styles and are demanding significantly higher prices than older models, when a smartphone is as low as US$ 99 and tablet computers less than US$ 200.
In a sign of how sensitive consumers have become to prices,
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Amazon. com’s top- selling laptop is a US$ 249 Samsung laptop running a new operating system based on Google’s Chrome Web browser.
Count Sterne Agee’s Shaw Wu is among the analysts worried about the future of Microsoft and its partners in the PC industry.
‘‘ We frankly believe [ Microsoft’s] strategy of forcing user interface changes that nobody wants has proven to be a disaster,’’ Wu wrote yesterday in a research note.
Nomura Securities analyst Rick Sherlund also took a dimmer view of Microsoft’s future prospect as he low- ered his recommendation on the company’s stock from a ‘‘ buy’’ to ‘‘ neutral’’.
In a note, Sherlund asserted that about half of all consumers now see little reason to buy a PC or any other device running on Windows.
Microsoft may try to lure back consumers by offering less expensive devices.
The company is now developing a smaller version of its Surface tablet to compete with similar- sized devices made by Apple, Google and Amazon. com, according to a report in The Wall Street Journal, which cited anonymous people familiar with the matter.
A Surface tablet with a 7- inch screen could hit the market this year, the Journal said.
Microsoft declined to comment yesterday.
Analysts say sales of the Surface with a 10.6- inch screen have been sluggish, despite an expensive marketing campaign.
Sherlund questioned whether Microsoft will ever pose a serious threat to Apple’s iPad, Google’s Nexus, Amazon’s Kindle Fire and a variety of other tablets running on Google’s Android software.
‘‘ If the need i s just for a tablet, Microsoft is not the first or second choice in the market and Windows 8 does not change that dynamic,’’ Sherlund wrote.
HP, the world’s largest PC maker, has been suffering sales declines with the rest of the market.
Its PC shipments plunged by 24 per cent in the first quarter. The company had been hoping to bounce back with the release of Windows 8.
With those hopes dashed, HP is now making a laptop that runs on the Chrome operating system. Chief executive Meg Whitman is also trying to expand the company’s more profitable businesses, such as business software, data analysis and consulting.
Intel, whose chips are in 80 per cent of the world’s personal computers but i s a laggard in mobile devices, is hoping to boost its revenue with a new line of microprocessors better suited for tablets and lightweight laptops.
Among other things, the new chips consume less power so battery life lasts longer. The largest investor in Research In Motion says he will stick with the BlackBerry company despite founder Mike Lazaridis’ announcement that he will leave the firm.
Prem Watsa, a board member who owns 10 per cent of the company, first became interested in RIM because of his friendship with Lazaridis.
The 52- year- old Lazaridis last month announced plans to leave RIM at the start of May. He stepped down as co- chief executive in January 2012, but stayed on as vice- chairman and a board director.
Watsa said yesterday at his annual meeting for Fairfax Financial Holdings that chief executive Thorsten Heins had done a great job since taking over last year, and he expected the company would do well over time.
He has called Lazaridis a technical genius who invented the modern smartphone and said he will be missed.
‘‘ Mike very simply said to us that he was tired. He had a ton of work. He’s going to be a big supporter of the company. He’s not going to sell his shares,’’ Watsa said.
‘‘ He chose Thorsten Heins to be chief executive and Thorsten has done an outstanding job in the last year and continues to.’’
Watsa said he’s a ‘‘ big supporter’’ of Heins and called his promotion the right decision a year ago. He also said he’s excited about the new BlackBerry 10 operating system.
The BlackBerry, pioneered in 1999, had been the dominant smartphone for on- the- go business people and other consumers before the iPhone debuted in 2007 and showed that phones can handle much more than email and phone calls.
RIM faced numerous delays modernising its operating system with the BlackBerry 10. During that time, it had to cut more than 5000 jobs.
RIM surprised Wall Street last month by returning to profitability and shipping about one million new touch- screen BlackBerry Z10 phones in the most recent quarter, which ended on March 2.
It will take several quarters, though, to know whether RIM is on a path toward a successful turnaround.