IDC reported preliminary global PC shipments of 60.3 million units (down 11.9% quarter-over-quarter, up 0.6% year-over-year) in the calendar first quarter, above our estimates of 58.8 million units (down 14.2% quarter-over-quarter, down 1.9% year-over-year), driven by healthy commercial demand as well as vendors locking in supply of components.
We highlight continued component supply constraints and pricing pressures, with vendors optimising mix toward higher-end (higher average selling price (ASP)) PCs. We also note the end of [ Microsoft (ticker: MSFT)] Windows Vista support lifecycle (although its share of the PC installed base is minimal).
We highlight that the PC market has continued to strengthen, with strong first-quarter Notebook build numbers posted by Taiwan original design manufacturer (ODM) companies as well (down 12% quarter-over-quarter, up 12% year-over-year versus our expectations of a loss of 20% quarter-over-quarter, up 1% year-over-year). Our global PC unit shipment forecast stands for calendar 2017/2018 at 260 million/265 million units. We expect a modest pickup in replacement rates in 2017, driven by an aging install-base as well as [Alphabet (GOOGL)] Chromebooks and VR-enabled gaming notebooks.
HP (HPQ) is back at No. 1, with potential upside to our estimates. IDC reported preliminary HP shipments of 13.1 million units (down 14.1% quarter-over-quarter, up 13.1% year-over-year) in line with our estimates of 13.1 million units (down 14.2% quarter-over-quarter, up 13.1% year-over-year). HP reclaimed its No. 1 spot for the first time since first-quarter 2013, after outperforming the market again (up 13% year-over-year growth versus up 0.6% year-over-year market growth). For the first quarter, HP held market share of 21.8% (up 240 basis points year-over-year). We note that HP is seeing accelerated growth in its PC business (up 13.1% year-over-year versus 6.8% year-over-year in the fourth quarter and up 3.6% year-over-year in the third quarter) and believe this suggests potential upside to our HP fiscal-second-quarter Personal Systems Group (PSG) estimate of $7.5 billion (down 8.8% quarter-over-quarter, up 7.2% year-over-year). We see sustained positive momentum in the PC business at HP. We reiterate our Outperform rating and $19 target price.
Lenovo (LVNGY) dropped to No. 2, coming in at 20.4% (down 200 basis points quarter-over-quarter, up 20 basis points year-over-year). We note here that Lenovo saw shipment grow on a year-over-year basis, with 1.7% year-over-year growth, but still fell behind HP in the leadership board. Overall, the top five accounted for 71.9% of global PC shipments, in the quarter, up from 68.1% in the same period last year.
Apple (AAPL) maintaining a unit share of about 7%. Apple shipments came in at 4.2 million units (down 21.6% quarter-over-quarter, up 4.1% year-over-year), Apple enjoyed a market share of 7% (down 70 basis points quarter-over-quarter, up 30 basis points year-over-year), but we believe rivals are increasingly focusing on its core target market, the premium high end. We note that the Mac business contributes around about 5% of Apple’s overall Gross Profit. As discussed in our note Scaling the Annuity, we see material potential for Apple’s Services. With Services being about a 70% gross-margin business, this continued growth continues to support our view that Services can grow from 15% to a third of gross profit long term. We reiterate our Outperform rating and $160 target price.
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