When the iPad first went on sale in 2010 pessimists proclaimed the end of the laptop era. Ten iPad generations later and that prediction has yet to materialise. But plunging sales over the past year suggest that the laptop’s end approaches more rapidly than ever.
The global personal computer market has contracted for years, yet many office workers still rely on them. In the first quarter, total shipments of desktops and notebooks fell a third over the previous year, the fourth straight quarter of double-digit declines, according to Canalys data. Notebook shipments suffered the largest decline, falling 34 per cent compared with a 28 per cent drop for desktops. These are now below the previous nadir in 2018.
On Wednesday, Lenovo’s earnings miss underscored this. The world’s leading PC maker reported a 24 per cent revenue drop for the first quarter. Net income fell 72 per cent to $114mn, significantly missing expectations. The latest results mark its third straight quarter of declines. Shares fell 8 per cent.
Weak sales figures in China, the world’s biggest market, only pile on the bad news. Instead of a hoped-for industry rebound as its economy reopened, shipments in mainland China fell by a quarter.
Meanwhile, total tablet shipments climbed 40 per cent over the same period. Lenovo does have a strong line-up of tablet devices. Yet in China, Apple is dominant. Its first-quarter shipments there more than doubled to 2.5mn units and it has almost 40 per cent of local market share. Smaller local peers have also done well. Honor’s tablet sales rose two-thirds.
Lenovo needs alternative growth engines. Its operating margins are less than 5 per cent. That explains its persistently cheap valuation, now at 8 times forward earnings. This multiple is at the low end of its already depressed three-year range.
Expanding into smartphones, servers and information technology services businesses helps; these make up about 40 per cent of group revenues. But competition here is fiercer than for PCs.
Laptops remain ever-present in the workplace. But a lasting shift away from these tools would mean manufacturers of accessories such as portable displays, keyboards and Bluetooth speakers should offer better profitability than computers themselves. The shutdown of laptops is nigh.
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