PC market: a price battleground

Hewlett-Packard is getting out of the PC business. Exit has to be easier than competing with companies such as Acer and China’s Lenovo, the third-largest player, which are built to get by on operating margins of 1-2 per cent (in good times). Are PCs a large ($250bn in global sales) and sluggish market doomed to become a battleground for companies willing to compete primarily on cost? In a word, yes. Annual revenue growth, in dollars, has averaged under 3 per cent in the past decade, according to IDC, with price declines offsetting unit growth. So far, this year is about average; earlier optimistic shipment estimates are being slashed. Tablets are much stronger, but Apple has an iron grip on this market for now and is taking share in high-end PCs. So why stay in the business? Tech conglomerates, including HP and Dell, used to argue that selling PCs provides supply-chain muscle (the same components that go into PCs are found in higher-margin products such as servers) and add clout to the sales effort, since customers can get a full package of hardware, software and services. Now HP, with all its PC strengths, is giving up. That suggests these reasons are no long compelling enough to justify hanging around in a market entering the final stages of commoditisation.