Chris Lau, Kapitall: The decline in PC sales continues, and some tech stocks may be better placed than others to come out on top. There is more data confirming the drought in PC demand is not over. This time, preliminary figures suggest that shipments dropped another 6.9% in the fourth quarter. The decline was steep, especially for Acer and Asus, whose shipments (by percentage) dropped in the double digits. [Read more from Kapitall: Stocks to Watch in the Gaming Market as Nintendo 3DS Sales Soar] Microsoft ( MSFT ), Intel ( INTC ), and Hewlett-Packard ( HPQ ) are tech stocks watching the PC market’s health carefully, but HP may have the most to worry about. The hardware giant still relies on PC sales to generate revenue. Click on the interactive chart to see data over time. Sourced from Zacks Investment Research. Lenovo (OTC:LVNGY) saw the greatest increase, with PC shipments rising by 6.6%. Its market share is now 18.1%, compared to 16.4% for HP. Source: Gartner HP lost market share to Lenovo for many reasons. In addition to good hardware design and quality, Lenovo embraced Windows 8 before the other PC makers. And Lenovo’s touch interface has proved popular with users. Don’t expect PC demand to improve The usual upgrade cycle for PCs ended when tablets and smartphones took priority for users. Even though PCs improve productivity over smaller devices, users are not necessar ily compelled to upgrade a PC if it is not broken. Computers sold several years ago (say with 4 GB RAM and a dual core processor) are good enough to run Windows 7. A solid-state drive upgrade would be enough to improve performance in these older machines.
Disappointment from Windows 8?To the surprise of many, Microsoft’s Windows 8 did not help spur demand for PCs. The “metro” interface was more suitable for tablet and touch devices, but overall proved confusing for the end user. Microsoft could be planning to replace Windows 8 with the return of the start button. But it is hard to say if this incremental release would slow the decline in PC sales. Tech Stocks to watch Though they are all up sharply in the last year, HP and Microsoft are stocks to watch carefully. HP is in the midst of a multi-year turnaround, and needs a stable PC market to support its restructuring efforts. HP shares are already up close to 25% in the last year. The failure for PC demand to improve could set off profit taking among some investors. Click on the interactive chart to see data over time. Sourced from Zacks Investment Research. Microsoft shares hover around $35.50. Profits continue to be strong on the server and enterprise space, but the company really needs Windows 8 sales to improve. The drop in PC demand is likely going to continue, and Microsoft will need to speed up innovation in its Surface tablet. A lower price point for its Pro tablet and ongoing integration between the tablet and the Windows phone could keep consumers interested in Microsoft. (Written by Chris Lau, a Kapitall Writer. All data sourced from Zacks Investment Research.)