PC Shipments for 2Q06 Better Than Expected: Dell, HP and Apple Gain Share

Bear Stearns analysts Andy Neff, Bill Hand and Ted Chung sent a note to clients outlining the latest worldwide PC sales figures -- key excerpt:

· 2Q06 PC shipments modestly better than expected at 10% growth; DELL gained slight share on aggressive pricing, HPQ continued to outgrow the market, AAPL gained share. Based on preliminary estimates from market research firms IDC and Gartner, worldwide PC shipments rose 10%-11% year/year largely driven by aggressive pricing and continued strength in notebooks, although growth by geographies varied from the prior quarter with a recovery in the US and continued strong growth in Latin America/Asia Pacific (ex-Japan) offset by a slowdown in Europe due to World Cup. Focusing on IDC data, which we use as basis for our PC forecast, 10% year/year unit growth was ahead of our estimate of 9% growth. Sequentially, PC shipments declined by 2%, which was better than our 3% sequential decline assumption and were in line with historical trend of 2% sequential decline.

· DELL, HPQ, AAPL gained share. While Dell and HPQ report financial results based on a July quarter and these numbers reflect the June quarter results (i.e., the final reported numbers could vary), DELL grew by 10.9% year/year and gained 21 basis points year/year on aggressive pricing and robust international sales, although its growth in the US of 6.4% year/year was about in line with the market. On a sequential basis, DELL’s shipments grew by 3.5% (compared to the market’s decline of 2% sequentially) with market share increasing by 100 basis points.

· HPQ continued to grow ahead of the market with unit shipments increasing by 13% year/year with market share increasing by 46 basis points, although its growth rate has slowed from the prior quarter as it saw slower growth in Europe.

· As expected, Apple experienced strong unit shipments owing to its refreshed Intel-based Macs with its shipments in the US increasing by 16% year/year with market share improving by 39 basis points.

· On the other hand, while GTW saw a 16.7% unit growth year/year in the US, this appears to be tracking below our total unit forecast for the quarter.

· US recovered, Asia Pacific remained strong, but Europe was weak (due to World Cup). By geography, US saw a recovery in demand with 6% unit growth driven by continued strong demand for notebooks and solid demand for desktops. European PC shipments increased by 7% year/year, which was below expectation due to the impact from World Cup while Asia/Pacific (ex-Japan) continued to see strong growth with PC shipments increasing by 23% year/year.

Stock impact: positive for HPQ, AAPL, SYNA (strong notebooks); mixed for DELL (modest share gain despite aggressive pricing); potential negative for GTW (unit shipment could be below our estimates).