A Status Update On The State Of PCs

During this holiday quarter, investors should not be expecting strong sales for the PC sector.  Digitimes expects to see  sales for PC-components decline by 10% (month over month) in December. High inventory and weak demand are the expected culprits. The forecast is no different from that provided by Intel (INTC) a few months ago, when the chip giant lowered its capital expenditure and reduced its revenue forecast.

Analysis

The bear phase in the PC sector that began earlier this year should be watched closely. The greater danger hurting demand is the proliferation of smartphone devices and tablets. Although consumers will want keyboard-based computers to do work, web-surfing, watching videos, listening to music, and other passive activities do not require a full-sized computer. Unless the PC-sector sells a device that offers usability, functionality, and convenience that is price-competitive and superior to tablets, profit growth will be limited.

Business Section: Investing Ideas

Chip Component Makers 

Chip makers reliant on the PC sector include

1. Advanced Micro Devices, Inc. ( AMD): Operates as a semiconductor company in the United States, Japan, China, and Europe. Market cap at $1.79B, most recent closing price at $2.52. AMD shares are down 53% YTD (year-to-date)

2. Intel Corporation (INTC): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $104.3B, most recent closing price at $20.96. Intel shares are down 10.60% YTD (year-to-date)

3. NVIDIA Corporation ( NVDA): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap at $7.85B, most recent closing price at $12.56. The graphics maker relies on chip sales in desktops and laptops. Its mobile division is growing rapidly. NVIDIA shares are down 8.8% YTD (year-to-date)

 

PC Makers and Related

4. Dell Inc. ( DELL): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $18.35B, most recent closing price at $10.56. Dell shares are down 27% YTD.

5. Hewlett-Packard Company ( HPQ): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $28.57B, most recent closing price at $14.53. HP shares are down 42% YTD (year-to-date)

6. Microsoft Corporation ( MSFT): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $231.96B, most recent closing price at $27.56. Microsoft shares are up 10.9% YTD (year-to-date)

 

Companies benefiting from smartphone growth include:

7. Synaptics Inc. ( SYNA): Develops and supplies custom-designed human interface solutions that enable people to interact with various mobile computing, communications, entertainment, and other electronic devices. Market cap at $933.19M, most recent closing price at $28.33. Synaptics shares are down 6% YTD (year-to-date)

8. Nuance Communications, Inc. ( NUAN): Provides voice and language solutions for businesses and consumers worldwide. Market cap at $7.17B, most recent closing price at $22.95. Nuance shares are down 8.8% YTD (year-to-date)

Analyze These Ideas: Getting Started

 

Written by Chris Lau

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