Is There MORE TROUBLE for the PC Market on the Way?

Earlier this week, Hhgregg Inc. (NYSE:HGG), a specialty retailer of home appliances and consumer electronics, slashed its full-year forecast. The company cited lower-than-expected revenues and an increase in advertising and general administrative expenditures to help offset lagging sales. However, a new report shows that many companies may experience a slowdown this year due to dismal PC sales.

Hhgregg (NYSE:HGG) now expects earnings per share to come in at 90 cents to $1.25 for fiscal 2013, with sales only increasing 3 percent to 6 percent. The company previously predicted earnings of $1.12 to $1.27 per share, with sales jumping 9 percent to 12 percent. Analyst David Schick from Stifel Nicolaus downgraded shares to Hold from Buy, and explained that the consumer electronics space is challenging and very competitive. While Hhgregg competes with retailers such as Amazon.com Inc. (NASDAQ:AMZN) and Best Buy Co. (NYSE:BBY), the tech industry is undergoing changes as consumers shift more towards tablet PCs.

The latest report from the market research firm International Data Corp. (IDC) shows that PC shipments totaled 86.7 million units in the second quarter. The figure was only a 0.1 percent decrease from the same quarter a year-earlier, but came in well below IDC’s conservative estimate of 2.1 percent year-on-year growth. The top PC vendors worldwide were Hewlett-Packard Co. (NYSE:HPQ), Lenovo and Dell Inc. (NASDAQ:DELL). Apple Inc. (NASDAQ:AAPL) was the only one of the top five U.S. personal computer vendors to see year-over-year growth in PC shipments.

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The firm explained, “Moreover, consumers remained reluctant about purchasing PCs in this environment of tech transition and soft economics. Ultrabooks have not yet produced a significant rise in volumes – in part due to anticipation of improvements such as Windows 8, which is expected later this year, but also due to pricing. Constrained demand in Europe and the U.S. has also been felt in emerging markets for some time, but the second-quarter brought another milestone of sorts as Asia/Pacific (excluding Japan) showed flat year-on-year growth; its worst performance in years.”

While many analysts are expecting Microsoft Corp.’s (NASDAQ:MSFT) Windows 8 fall release to jump start the PC market later this year and into 2013, expectations continue to rise for Apple’s popular iPad. Needham & Co. analyst Charlie Wolf on Thursday substantially raised his earlier estimate of iPad sales in the June quarter, predicting a record 20 million unit sales for the tablet rather than his earlier guess of 13.5 million.

The future continues to improve for the tablet PC market. Microsoft recently announced it is launching its own tablet called Surface. Thus, giving consumers an option to experience the Windows operating system on a device other than a traditional PC. Last month, IDC raised its full-year tablet forecast to 107.4 million units, due to strong demand. “Demand for media tablets remains robust, and we see an increasing interest in the category from the commercial side,” said Tom Mainelli, research director at IDC. “We expect pending new products from major players, increasingly affordable mainstream devices, and a huge marketing blitz from Microsoft around Windows 8 to drive increased consumer interest in the category through the end of the year.”

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