PC sales for Dell, Hewlett-Packard pressured by tablets

Hewlett-Packard reports its earnings today, and PC sales are likely to be hurting in the market flooded by smartphones and tablets.

Hewlett-Packard reports its latest quarterly earnings today, and many analysts are expecting more signs of a shift away from personal computers. Last week, Dell reported a 19 percent year-on-year decline in PC revenue. So is there still money to be made selling PCs?

HP has been wrestling with that question for many months. The company announced that it was planning to get out of the PC business last year, but then reversed course soon after Meg Whitman took over as CEO. As mutual fund manager Brian Frank tells it, "They said, 'Just kidding, you know, that was a bad idea.' "

The indecision reminds University of Michigan professor Erik Gordon of the early days of the PC business. He recalls that makers of bigger, clunky mainframe machines were slow to react to the personal computer.

"Now the PC makers find themselves in the same position of going extinct," Gordon says, "and for the same reason: They poo-pooed the new guys as being 'little toys.' "

HP's tablet efforts have been disappointing so far, but it has vowed to keep trying with a Windows 8 tablet aimed at businesses. In the meantime, investment manager Frank foresees a lot more PC sales to business and government, contrary to the dire straits that share prices of the big manufacturers might suggest.

"The valuations are signaling the end of the PC next year," says Frank. "I mean, they're ridiculously cheap."

Still, an IHS Global report last month predicted that PC shipments will decline by 1.2 percent this year, which would mark the first drop since 2001.

Professor Gordon says the writing is on PC screen for a business that's "mature, gray and even boring." He adds, "its days as a growth industry are over."

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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