Why Dow Tech Stocks Are Getting Crushed Today
The Dow Jones Industrial Average is making a good showing today, yet Dow tech stocks are getting hammered after it was reported that PC sales were far worse in the first quarter than expected. As of 1:15 p.m. EDT the Dow is up 67 points, or 0.46%, to 14,869. The S&P 500 is up % to 1,594.
Yesterday, market intelligence firm IDC reported that in the first quarter of 2013, worldwide PC shipments dropped 14% from the year before. That's far worse than the decline of about 8% that IDC had previously forecast, and it's the worst quarterly drop since IDC began tracking the PC market in 1994.
PC sales are being hurt by a confluence of forces. Tablets, smartphones, and "phablets" are eating into consumers' demand for PCs. The news gets worse by the day as companies launch more and more products to compete with PCs. Just today Samsung announced that it is launching the Galaxy Mega, a new phablet that will have a 6.3-inch HD screen. Consumers have been holding off on purchasing new PCs as their current machines collect dust and they increasingly use tablets and smartphones.
The other factor IDC blames is Microsoft's Windows 8 operating system. IDC's Bob O'Donnell said, "At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market." The news sent Microsoft's stock down 4.8%, making it the second-worst Dow stock of the day. Microsoft's Windows 8 is a response to the decline of PCs intended to be a single-user experience across all form factors. The only good news from Microsoft is that, according to The Wall Street Journal, the company is working on a new 7-inch Surface tablet to better compete with competitors' offerings.
Today's worst Dow stock
Today's worst-performing Dow stock is Hewlett-Packard , down 7.7%. In the report, IDC forecast that in the first quarter, HP's worldwide PC shipments would be down 23.7% compared with the prior-year period, while its U.S. PC shipments would drop 22.9%. The news gives credence to Goldman Sach's call that the stock had risen too high given the long-term nature of turnarounds and the challenges PC manufacturers are facing. HP's PC woes puts more pressure on the company's Moonshot server project, which the company unveiled on Monday. HP is touting its Moonshot servers for their cost savings of nearly 80% relative to traditional servers.
Intel stock has been on a tear this week on news that its chips will launch with HP's Moonshot servers. While Intel dominates the PC chip market, it faces a tougher fight in the server and mobile markets against rival ARM, whose chips are known for their efficiency. The news from IDC has pushed Intel's stock down 2.7% today.
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The article Why Dow Tech Stocks Are Getting Crushed Today originally appeared on Fool.com.Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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