Responding to news late yesterday that the�personal computer�market saw roughly 2% growth in Q1, according to�Gartner�and�IDC, Street analysts were generally pleased with higher-than-expected shipments, though they seem generally reluctant to expect too much from the PC business the rest of this year.
Shares of PC makers are mixed today,with Hewlett-Packard (HPQ) rising $1.45, or 6%, to $24.86, and Dell�(DELL) unchanged at $16.25. Apple (AAPL) stock is down 88 cents at $625.32 as the company contends with the fall-out of yesterday’s anti-trust suit by the U.S. Department of Justice over e-books.��
Amit Daryanani, RBC Capital: He’s encouraged by Hewlett-Packard’s�outperformance, which might be evidence things are turning around: “Our sense is that HP�s gains may have come after HP decided to reverse Leo Apotheker�s decision and retain the PC business. HDD shortages probably tempered growth to a degree, but 160bps of market outperformance also suggests that HP�s execution was better than peers. We believe it�s a positive for the stock if HP can continue to deliver high levels of operating margin (~5%) while also steering PCs back to growth. We do not believe the recent decision to combine PSG (PCs) and IPG (printers) into one category will have a negative impact on the segment. Our sense continues to be that HP is poised to see better fundamentals emerge in the 2H12.”
Doug Freedman, RBC Capital: The upside in units supports his thesis Intel’s (INTC) forecast for $12.8 billion in revenue in Q1, at the midpoint of its range, is probably a low bar that the company will beat. Freedman rates Intel shares Outperform with a $33 price target.
Keth Bachman, BMO Capital Markets: He’s sticking with a view that PC sales improve slightly in the latter half of this year, around Microsoft’s (MSFT) “Windows 8,” and he sees full-year sales up 0.2% in units. As far as Hewlett-Packard, “we suspect HP may have been aggressive in pricing to regain the share.” As far as Dell, Bachman’s been modeling a 2.4% year-over-year sales decline for the company, but was “surprised” by the large unit decline Dell suffered. He wonders if they “traded market share for better profitability.”
Bachman has a Market Perform rating o both stocks.
Abhey Lamba, Mizuho Securities: He continues to see a 2% to 3% increase in units for the full year, despite the surprise in Q1, which he expected to reflect a decline of 2%. Lamba is not convinced regarding HP’s apparent return to health: “We note that Gartner’s data is for the Jan-March period whereas HP’s current quarter will include sales from February through April. Since HP benefited from some PC unit push outs from December to January, we believe our HP PC unit forecast of 14M is reasonable. In our view, management’s recent decision to combine the PSG and printing groups could potentially raise execution risk for its PC unit.”
Mark Moskowitz, JP Morgan: The rise was better than his projection for a 0.4% decline. The numbers reinforce his sense IT spending is returning, though there are better ways to play it: “On March 13 we raised our 2012 IT spending forecast to 3.7% YoY, versus 3.4% previously. Also, for the first time in 18 months, we raised our 2012 PC unit growth estimate to 1.8% YoY, versus negative -1.5% previously [�] The preliminary PC results for 1Q12 support our view of a positive inflection point in PC market dynamics and improving IT spending trends. We believe that other end markets will exhibit even better incremental improvements than PCs [�] We continue to expect higher growth in storage, servers, security, and software apps.”
Nomura Equity Research’s Rick Sherlund, who maintains a Buy rating on shares of Microsoft, and a $37 price target, writes that it’s a mixed bag for the company: good overall, even though sell-through of PCs may have been below “sell-in,” in the quarter, because of some replenishment of channel inventory, he thinks. However, “Microsoft�s growth should lag PC growth because of the mix of higher growth in emerging markets that have high piracy,” he adds.
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