What’s the current state of the PC business? Dell and HP, two of the biggest PC suppliers, just gave tech providers a glimpse. Both suppliers this week reported quarterly financial results that reveal how the PC market is changing.
For both vendors, PC sales are growing. But in HP’s case, that’s despite a drop in the number of unit shipments. And for Dell, the growth is only in systems for business and a few high-end consumers.
HP — currently the No. 2 PC supplier worldwide by market share, according to IDC — this week reported financial results for the first quarter of its fiscal 2019.
Overall, HP’s Personal Systems group (that’s what HP calls its PC business) saw Q1 revenue rise 2.3% year-on-year, even though the total number of PCs it sold declined by 3%.
More specifically, Q1 revenue for HP Personal Systems totaled $9.66 billion. The group’s operating profit for the quarter was $410 million, or 4.2% of revenue.
By product type, the story was the same — a big gap between revenue and the number of units shipped.
For notebooks, HP’s revenue in Q1 rose 6%, even though the number of units fell by 1%.
Similarly, HP’s desktop revenue in Q1 fell 3% for the quarter, but the number of units sold fell by an even greater 8%.
How does HP do it? With higher average selling prices. Sell 10 PCs for $1K each and you bring in a total of $10K. Sell only 8 PCs, but this time for $1,500 each, and you have a higher total of $12K.
Do that a whole bunch of times, and you too can have a profitable, multi-billion-dollar business!
Dell — the No. 3 PC vendor by worldwide market share, according to IDC — yesterday reported financial results for both its fourth quarter and full fiscal year of 2019.
Dell’s PC business, known as the Client Solutions Group, had Q4 revenue of $10.9 billion, a year-on-year increase of 4%. For the full fiscal year, CSG revenue grew by an even stronger 10%, reaching $43.2 billion.
Yet look a bit closer, and a more complex picture emerges.
For the fourth quarter, Dell’s sales of consumer PCs actually declined by 6%, dropping to $3.1 billion. However, that was more than made up by a 9% rise in commercial PC revenue, hitting $7.8 billion.
Dell says it enjoyed double-digit revenue growth during the quarter in two main segments: commercial notebooks and workstations, and high-end consumer notebooks and displays.
So what’s it all mean for tech providers?
One, if you’re concerned about a decline in unit sales, take a lesson from HP and try raising your average selling price.
Two, take a lesson from Dell and steer clear of low-end consumer systems. The growth is elsewhere, most specifically business notebooks and gaming systems.
As these two suppliers show, your PC business can grow and be profitable — but only if done right. The market is changing, and what worked in the past may not work now or in the future.
So take some lessons from the big guns of the PC business, and prosper.