Updated from July 11 to provide more analyst comments in the thirteenth paragraph.NEW YORK ( TheStreet) -- The PC market continues to decline sharply, falling 10.9% year-over-year in the second quarter to just 76 million units, according to Gartner. That's going to put a lot of pressure on companies such as Microsoft ( MSFT), HP ( HPQ) and even Apple ( AAPL), as the companies struggle to figure out where the bottom is. Much of the blame continues to be on Windows 8, which has been poorly received in the market place. Microsoft wound up having to make major changed to Windows 8.1 in light of the poor reception from Windows 8, including bringing back the "Start" button. Ultrabooks, which the PC industry hoped would become a strong competitor to Apple's MacBook Air, have not taken off as hoped. For a company like Microsoft, the PC slowdown may not affect it that greatly, despite the obvious headwinds. Credit Suisse analyst Philip Winslow, who was expecting 78.8 million PCs sold during the quarter, notes that the U.S. market is Microsoft's best market, due to low piracy rates and the professional market actually outperforming expectations. "Combining these factors, we believe the overall negative impact to revenue estimates for Microsoft should be more muted this quarter as compared with recent downside surprises in PCs," Winslow wrote in his report. Winslow rates Microsoft "outperform" with a $38 price target. For the actual PC makers themselves, such as HP and Dell ( DELL), the story is a little more bleak. These companies do not have the luxury of selling software to all the original equipment manufacturers like Microsoft does. Lenovo, which claimed the top spot from HP with 16.7% market share, runs Windows, and allows Microsoft to at least diversify its revenue base among hardware makers. HP, Dell, and to a much lesser extent Apple, don't have that luxury. Topeka Capital Markets analyst Brian White expects HP and Dell to continue losing share, as tablets continue to eat away at PC-spend dollars, and as Asian competitors, such as Lenovo, continue to rise. "We believe Lenovo will ultimately be the dominant player in the PC market and we expect other Asia-based vendors to rise in prominence, while we expect Hewlett-Packard and Dell to continue losing PC share in the coming years," White wrote in his note. HP owns 16.3% of the market as of the end of the second quarter, according to Gartner, and 16.4% according to IDC. One bright spot to note is that while Lenovo took the top spot overall, HP actually gained ground in the important Asia-Pacific (APAC) region. RBC Capital Markets analyst Amit Daryanani notes the company is benefiting from building out its presence in this region. "This follows March-qtr when HPQ maintained the top spot across all major categories in China and India. As a result, Lenovo actually lost market share in APAC, particularly in China," Daryanani wrote in his note.
HP is in the midst of a turnaround, led by CEO Meg Whitman, as it tries to turn itself into more of a complete solutions company, and while Wall Street has taken notice, the company still has a long way to go. Dell, on the other hand, is in even worse shape. The company, which is currently trying to go private, is in third place, with around 12% of the market. It doesn't have any mobile offerings that will help drastically change the drop in PC sales. Gartner estimates sales fell 3.9% year-over-year to capture 11.8% of the market. IDC is a little more positive on Dell, noting it had 12.2% of the market, which is actually up from the first-quarter, when it had 11.7% of the PC market. However, the recent ugliness over the battle to take the company private continues to put a cloud over the company's future. Apple is in a much different position than either HP or Dell, as the iPad has largely been responsible for the drastic decline in PC sales. Apple is still the No. 3 seller of computers in the U.S. market with 11.5% share as of the second-quarter, but sales continue to slow, albeit at a much slower pace than HP or Dell. Apple's ability to adapt well before its competitors and capture the lead in the tablet market has put the Cupertino, Calif.-based company in an enviable position, as consumers computing needs shift more and more to mobile devices. In a note Friday to investors, UBS analyst Steven Milunovich points out that Apple, while considered "a niche PC company," is actually poised to pass Dell to become the third biggest PC company on a sales basis, behind Lenovo and HP. With Apple having the Mac platform as well as iOS devices, there is concern that Android will "bury" iOS as a platform, but Milunovich doesn't see it that way. "Some posit that Android will take out iOS the way Windows overcame Mac based on the belief that Apple lost (not so clear since PC hardware is cumulatively in the red) because open beat closed," the analyst wrote in his note. "Alternative explanations are that Microsoft won more on economies of scale or that Apple made a mistake trying to monetize both sides of its multi-sided platform. We don't buy that Android is going to bury iOS." CEO Tim Cook has said in the past that the iPad may wind up being the biggest opportunity of all for Apple, as the PC market continues to shrink, and Apple continues to innovate in mobile devices. -- Written by Chris Ciaccia in New York >Contact by Email. Follow @Chris_Ciaccia