Lowered PC Shipment Forecasts Negative for Microsoft
Gartner, a market research firm, recently issued a revised forecast for PC shipments in which it lowered the PC market outlook for 2010 and 2011. [1] According to the report, the emergence of tablets and smartphones and the weak economic outlook in developed markets could slow the growth of PC sales.
Microsoft (NASDAQ:MSFT) depends largely on the PC market growth and hence any bad news regarding the PC market outlook could impact its stock. In addition to Microsoft, other stocks sensitive to PC sales like HP (NYSE:HPQ), Dell (NASDAQ:DELL), Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), AMD (NYSE:AMD) and Nvidia (NASDAQ:NVDA) could be affected.
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PC Market Outlook More Muted
Although Gartner predicts a respectable growth rate for PC shipments of around 14% in 2010 and 16% in 2011, it is lower than the 19% 2010 estimate it predicted in its August report. [2]. We estimate that the notebooks and netbooks market will grow from 86 million in 2007 to 203 million in 2010, and that it will reach 381 million by the end of Trefis forecast period. This is an estimated 10% growth rate over the Trefis forecast period.
[trefis_forecast ticker=”MSFT” driver=”0620″]
Tablets and Smartphones the Culprit
Gartner has revised its PC shipment estimates lower for 2010 and 2011 due to the economic slowdown in developed markets and cannibalization from tablets and smartphones. Since these devices offer many similar functions as PCs, users are delaying buying PCs.
If this trend continues, the PC market growth could slow down even more. There could be downside of around 5% to the $31.56 Trefis price estimate for Microsoft’s stock if the notebooks and netbooks market growth slows down to an average of 6%, instead of 10% as we forecast. This indicates that notebooks and netbooks shipments would increase slowly to 300 million by the end of Trefis forecast period vs. 380 million as we forecast.
You can see the complete $31.56 Trefis Price estimate for Microsoft stock here.
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