Dell, HP struggle with consumer PC businesses

Dell, HP struggle with consumer PC businesses

Summary: HP and Dell may need a Windows 8 upgrade cycle to save their PC profitability over time.

SHARE:

Two companies largely known for their PC brands are taking their lumps as consumer demand dries up and a hard drive shortage continues to wreak havoc.

Dell and HP both reported earnings this week and painted a PC demand picture that's shaky.

HP CEO Meg Whitman said on a conference call that "the hard drive shortage and continuing difficulties in China contributed to a revenue decline of 15% year-over-year" for the PC unit (PSG). HP reported better-than-expected profits in the first quarter, but revenue and the company's outlook missed estimates.

Meanwhile, HP is struggling with innovation. If ultrabooks don't become a hit HP won't have many answers. "For all that's right with PSG, we underinvested in innovation for the last several years and we've been late to market too often. We have to lead again," said Whitman.

HP, which decided to keep its PC business a few months ago, argues that the HP business helps the company get better deals on components. However, HP's server business also struggled.

Overall, HP is doing a good job focusing on profits in its PC business. The company managed to deliver an operating profit of $464 million on revenue of $8.9 billion in its fiscal first quarter. Those results, however, overshadowed notebook, desktop, consumer and commercial revenue declines.

For Dell, the PC business---especially the consumer unit---isn't so hot. Dell's consumer revenue in the fourth quarter fell 2 percent to $3.2 billion with operating income of $39 million. Sure, Dell's consumer business is profitable, but the profits pale next to other units.

Dell's desktop PC sales grew 3 percent in the fourth quarter compared to a year ago. Mobility sales---laptops---were up 1 percent in the fourth quarter.

Steve Felice, president of Dell's consumer and SMB business, said on a conference call:

In the fourth quarter results were mixed. Total revenue and margin weakness was largely concentrated in the US market with a decline of 15%. We continue to see good progress in our high-end Consumer systems as our XPS notebook revenue increased 103% for the full year. So while we're disappointed in the Q4 profitability, we're pleased with the overall progress made during fiscal year 2012.

Dell CFO Brian Gladden noted that Dell wasn't able to procure hard drives and had to sell lower margin systems.

Bottom line: HP and Dell may need a Windows 8 upgrade cycle to save their PC profitability over time.

Topics: Hardware, Banking, Dell, Enterprise Software, Hewlett-Packard

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

75 comments
Log in or register to join the discussion
  • It's just not a GREAT business to be in....

    And hasn't been for years now. Razor thin margins to gain market share is a loosing tact. However because of the nature of that business that is the only option many if not all feel they can go with.

    Pagan jim
    James Quinn
    • RE: Dell, HP struggle with consumer PC businesses

      @James Quinn Agreed, Dell and HP (along with Gateway 2000, Packard Bell, etc) started the "economies of scale" price war back in the late 90's. In 1996 you could still make $500 on a computer sale, now you're lucky to make $50. It's ironic if you think about it, they squeezed the margins so tight that now that the IT economy has hiccuped because of the hard drive shortage, there's not enough margin to hold them over during the slump.
      bartigas
  • Cause Consumers Don't Want Windows...

    They know it's a lousy experience. Before the iPhone they never really knew about Apple's products and thought all computers were hard to use, unreliable, and a general pain. Then they got experience with the iPhone and how easy it was to use and more important how reliable it is.

    After that they looked at the computers Apple makes and thought "my phone is reliable, let;s try their computers". Yes, they are a little more than a bottom end PC but they are much more reliable than one too. And let us all not forget, HP, Dell, Lenovo, etc all make computers as expensive as or more expensive than any Mac model.

    After all, the PC industry is down and yet Apple keeps increasing sales and marketshare? Think long and hard as to why and your answer will be "because people are fed up with Windows". Same thing happened to GM....
    itguy10
    • RE: Dell, HP struggle with consumer PC businesses

      @itguy10 Agree with you. The world has changed quite a bit. And Steve Ballmer is more interested in mocking Apple and Android than delivering. Even their WP7 fails to make headway in the US.

      If W8 is good AND if HP/Dell succeed in making Ultrabooks that cost half of a typical Macbook Air, then they may at least get some more market share. The current crop of Ultrabooks leave a lot to be desired and you are better off buying a Macbook Air. Some of them use regular hard drives. Most of their touch/track pads are horrible to use compared to a Macbook Air. And they are not cheap either.
      GoForTheBest
      • So in short...

        @iRMX
        HP and Dell don't sell PCs even nearly as much as they'd like because they suck. I've known that for years but for most consumers they needed the eyeopener called Apple. IT is too important to sell cheap.
        Mikael_z
    • LOL!

      @itguy10 <br>Once again you show you haven't a clue as to what you're talking about<br>or is it you're just a troll? The jury's still out on that question.<br><br>If people don't want Windows, how come the 4 people I know with Macs have Windows 7 running on it? It came that way? ;)<br><br>The PC industry always drops right before the release of a new version of Windows, and in 28 years 122 million Macs have been sold, and yet as of the end of 2011 over 450 million copies of Windows 7 have been sold So, think long and hard as to why and your answer will be "because people are excited about new versions of Windows". <br><br>The sales figures prove that without any doubt. :)
      William Farrel
      • RE: Dell, HP struggle with consumer PC businesses

        @William Farrel
        I know. I feel sorry for itguy's customers, assuming he has any. What a tool. A real itguy is not a fanboy of any company.
        lippidp
      • RE: Dell, HP struggle with consumer PC businesses

        @William Farrel

        Same here, my successful customers bought Macs to carry between home and work. They also bought full list price copies of Windows 7 to run our SQL Server Express based product. Most of our customers use regular Windows PCs throughout the business. Most of those owners have a Mac as well.
        mswift@...
    • iPhone... reliable? Joke?

      @itguy10 I'm sorry, iPhone? Reliable? do you remember when they were first released? Because of the iPhone the world has a new term for the catastrophic failure of an electronic device... 'Bricking'.<br><br>That is not the hallmark of a reliable anything!
      deadly_dodo@...
      • RE: Dell, HP struggle with consumer PC businesses

        @deadly_dodo@... actually the term 'Bricking' has been in use for some time, just not so well known then as it is now.

        But... point taken :)
        kfortner51
      • Bricking?

        Wasn't bricking what happened after you jailbraked you iPhone and then updated software from Apple?

        That doesn't apply to the majority of people. (Not that I am defending Apple. I don't own an iAnything, but bricking the device is a pretty crappy way to treat your customers, even if they do like to tinker...)
        mlashinsky@...
    • RE: Dell, HP struggle with consumer PC businesses

      @itguy10 What?
      kfortner51
    • RE: Dell, HP struggle with consumer PC businesses

      @itguy10 As far as costing a little more...maybe not once you add in the Wintel security tax for your yearly antivirus subscription, and the cost of other software for your Wintel that comes free with a Mac.
      Techboy_z
      • RE: Dell, HP struggle with consumer PC businesses

        @techboy_z
        There is a reason that software comes free on a Mac. You get what you pay for.
        kstap
      • add in the Wintel security tax for your yearly antivirus subscription,

        COMODO Internet Security is a free service.
        JTONLY
      • Apple racked up 90,000 complaints of Virus

        Before they acted, and that was only after an internal memo leaked to the press where they were telling their tech support to ignore them. Whoever you are and whatever you are using, you had better have some security on your system. Other than that you are wide open to be picked off.
        techenduser
    • RE: Dell, HP struggle with consumer PC businesses

      @phonyitguy10
      At least when I purchase a PC from these vendors, I'm aware that I am not being ripped off ala Apple.
      kstap
    • RE: Dell, HP struggle with consumer PC businesses

      @itguy10 I generally laugh at your comments as most are just so obtuse but I have to comment on this one as always you mislead with this set of comments.

      I can certainly attest to how unreliable my wife's IPhone 4s is. She literally has to reset the damn thing every 2-3 days. Easy to use, sure. I guess.

      You are misleading people with comments of increasing sales, percentages and marketshare. I'm no mathematician and please correct me if I am wrong, Apple sold 4.8 million units this quarter, a 16% increase. That means they sold 756,000 units more than the previous quarter at best. HP sold 62 million last year, Dell sold 44.3 million units last year, Lenovo sold 44 million units laster with Acer and Asus at 50 mil. All told, almost 201 million units. Even if HP sold 3% less units this quarter over last, they still sold 15 million freaking units in the quarter. That's more MAC's then Apple sold all last year practically. Dell had a 3% increase in units sold according to this article which puts them right around 11.5 per quarter. Apple has a long to go to make up those kind of numbers.

      And as to your comment of MAC hardware being more reliable. My MAC mini just decided not to power up today for some reason. Just under 1.6 months old. That doesn't seem all that reliable to me as my $640 HP6530b sitting right next to it is running just fine.

      Same thing happened to GM???? 8 billion this year!!! Best year for in history for GM!

      Just my 2 cents is all.
      jboettger@...
    • Partially agree with you

      Windows is tired and old and if I could get the total Android experience on my pc I would chuck it like and old fat girlfriend. Windows adds to the declination of the pc experience and those every Tuesday updates pretty much create end user problems. You system might be working fine before the update.

      Apple is just the new flavor. It will run its course. Some are already signing off. For me I don't like the basic designs of the only two models they do have and I don't want a lit piece of fruit on my computer. You had better come better than that. Hardly cutting edge design and the air looks so cheap and flimsy. The other one the pro looks clunky and plain.
      techenduser
  • Good for Apple - Not good for Windows

    Good thing Apple's doing good in the midst of all the Windows dreg out there.

    http://tech.fortune.cnn.com/2012/01/12/mac-sales-zigged-as-windows-sales-sagged-in-q4/
    ScorpioBlack