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Dell Inc. (DELL), Hewlett-Packard Company (HPQ), Apple Inc. (AAPL): Can the PC Market Get Anything Right?

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Dell Inc. (NASDAQ:DELL)The personal computer market can’t seem to get anything right. Research firm IHS iSuppli reported on June 27 that first-quarter shipments of notebook computers by original design manufacturers (ODMs) like Compal Electronics and Quanta, which are largely responsible for building the mainstream laptops, were worse than had been originally forecast. Shipments declined 17% from the prior quarter to 33.2 million units, plummeting 12% year-over-year.

On April 10, it was reported that PC shipments overall were the worst in years, possibly the worst on record, according to IDC. iSuppli furthers that the 17% drop from Q4 of 2012 to Q1 of 2013 in original design manufacturers was four-to-five percentage points worse than what was modeled for the quarter. The firm continues on to say the results “confirm an even more debilitated market, and the latest numbers were the worst of the last 12 quarters.”

The report displays the hardest hit notebook ODM was Quanta, which lost its top position in the industry. Quanta supplies Apple Inc. (NASDAQ:AAPL)Hewlett-Packard Company (NYSE:HPQ)Dell Inc. (NASDAQ:DELL), Lenovo, and other major brands with manufactured notebook products. Strength for Quanta was derived from stable notebook PC shipments to clients Lenovo and Dell Inc. (NASDAQ:DELL).

Analyst Peter Lin of Suppli stated that a number of substantial factors contributed to the weakness in the industry, including global macroeconomic woes. Further Lin goes on to state:  “Notebook ODMs and their brand-name customers also are contending with the robust competition in the consumer market coming from smartphones and tablets.”

However, iSuppli notes factors that could potentially assist the notebook industry later this year, including an update to Microsoft Corporation (NASDAQ:MSFT)’s Windows 8, which most prominently would add a home button, a new microprocessor from Intel Corporation (NASDAQ:INTC), and the introduction of lower-priced ultra-thin PCs with new touch-enabled features.

So what?

Which companies stand to be effected most considerably by the deterioration in the PC market? Dell Inc. (NASDAQ:DELL), Hewlett-Packard Company (NYSE:HPQ), Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Intel Corporation (NASDAQ:INTC) are just five companies positioned to be most influenced by this troubling trend.

In Dell Inc. (NASDAQ:DELL)’s fiscal year 2012, the company derived $28.3 billion in revenue from the mobile and desktop PC industries, which accounted for 49.7% of total revenue. This segment has been of particular weakness over the past year, with the mobile PC segment decreasing 19.9% with respect to revenue year-over-year, and the desktop PC segment deteriorating 8.1% over the same time period.

In the company’s 2013 fiscal year, Dell generated $56.9 billion in revenue, a metric which is anticipated to fall to $51.9 billion by 2017. The profitability metric of the company is a weakness, with Dell currently possessing a trailing-12 month profit margin of 3.3%. Projections place this metric remaining relatively stable, increasing to 3.5% by 2015. The company pays out quarterly dividends of $0.08, which annually puts the dividend as yielding 2.4%. In respect to valuation, Dell Inc. (NASDAQ:DELL) does not appear vastly overpriced with a price-to-earnings ratio of 12.5.

Hewlett-Packard Company (NYSE:HPQ)’s business is also heavily dependent on the PC market, with 29.6% of overall revenue being derived from the personal-systems segment in 2012. The revenue created by the overall segment decreased 9.9% year-over-year between 2011 and 2012. Desktop PCs declined 3.4% year-over-year, while notebook PCs tumbled 6.3%.

In 2012, H-P created $120.4 billion in revenue, a statistic which is expected to fall to $107.0 billion by 2015. Presently, the company possesses a trailing-12 month profit margin of -11.6%, representing a fundamentally flawed business model. Projections display the profit margin recovering to positive territory by 2013, and reaching 5% by 2015. The company pays out quarterly dividends of $0.15, which annualized puts the dividend yielding 2.3%. On a valuation basis, Hewlett-Packard Company (NYSE:HPQ) carries a negative price-to-earnings ratio.

Unlike Dell Inc. (NASDAQ:DELL) and Hewlett-Packard Company (NYSE:HPQ), Microsoft is only concerned about selling laptops and desktop PCs that sport its Windows software. The Windows segment of Microsoft produced $18.4 billion of revenue in the company’s fiscal 2012, representing 24.9% of overall revenue for the year. Revenue derived from this segment decreased 3.5% from 2011 to 2012.

In 2012, Microsoft Corporation (NASDAQ:MSFT) produced $73.7 billion in revenue, a metric which is projected to rise to $88.8 billion by 2017. At the moment, the company carries a trailing-12 month profit margin of 21.6%, displaying a relatively strong business model. Projections anticipate the company’s profit margin strengthening to 30.5% by 2015. Microsoft pays out quarterly dividends of $0.23, which annualized puts the dividend as yielding 2.7%. On a valuation basis, Microsoft holds a price-to- earnings ratio of 17.5.

Apple Inc. (NASDAQ:AAPL), like Microsoft, is heavily diversified, with a broad product portfolio. The company’s exposure to personal computers is a result of its Mac line. The total Mac line produced $23.2 billion of revenue in 2012, representing 14.8% of overall company revenue. In terms of revenue from 2011 to 2012, the overall Mac segment increased 6.6%, the Mac portables segment increased about 12.0% and the Mac desktops segment decreased 6.2%.

Apple Inc. (NASDAQ:AAPL) generated $156.5 billion in revenue in 2012, a mark which is projected to rise to $222.2 billion by 2017. Currently, Apple carries a trailing-12 month profit margin of 23.5%, a statistic which is expected to decay to the 15% level by 2017. Apple pays out quarterly dividends of $3.05, which annualized puts the dividend as yielding 2.9%. On a valuation basis, Apple Inc. (NASDAQ:AAPL) carries a price-to-earnings ratio of slightly less than 10.0

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