Slowdown in PC Sales is Taking a Bite Out of Tech

This post was originally published on this site — Companies that depend on sales of personal electronics are taking a hit from inflation and the rebound from the pandemic.

Intel Corporation (NASDAQ:INTC) said sales from its division that supplies personal computer makers slumped 25% last quarter. The company makes most of its revenue from PC chip sales. Shares of Intel fell 8.8% on Friday.

The outlook doesn’t seem ready to improve. Data analytics firm Gartner estimates that PC shipments globally will drop 9.5% this year.

“A perfect storm of geopolitics upheaval, high inflation, currency fluctuations and supply chain disruptions have lowered business and consumer demand for devices across the world and is set to impact the PC market the hardest in 2022,” said Gartner’s senior director analyst Ranjit Atwal in a recent statement. Gartner added that consumer PC demand is on pace to decline 13.1% this year.

Earlier this month, the Consumer Technology Association said U.S. technology industry sales and shipments will drop 0.2%, or $1 billion, in 2022. This projection is down from 2021’s record high growth of 11.6%.

The trend is showing up in earnings reports. Apple’s (NASDAQ:AAPL) Mac sales fell 10% last quarter, and iPad tablet sales fell 2%. Apple shares rose 3.4% on Friday.

Best Buy Co Inc (NYSE:BBY), the consumer electronics retailer, expects same store sales in fiscal 2023 to fall 11%, which is worse than previous guidance for a fall of 3% to 6%. It also said second quarter same store sales would fall 13%. Best Buy CEO Corie Barry said earlier this week, “As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer-electronics industry has softened even further.” Best Buy shares were down 0.7%.

Consumers loaded up on PCs, laptops and other personal electronic devices in the last two years, as the pandemic changed work and school life for many into a remote experience, but that demand wasn’t expected to last. Still, rising inflation is also forcing consumers to make choices at the store, putting purchases of discretionary items such as TVs and computers off to another day while they spend more of their budgets on necessities such as food.

The CTA projects dollars will shift to smart home and health devices. Hardware revenue for smart home devices will grow 3% this year, it estimates, especially for devices that control lighting, thermostats and outlets. Health technology sales are projected to grow 4%, including smartwatches and fitness trackers, the CTA said.