HP decides to exit PC market: Dell and Apple fight for the top

Joanna Kalafatis's picture

Hewlett Packard has been struggling for some time now with its PC business, even though it is the global market leader in the industry, because of diminishing profit margins and its failure to keep up with the times.

What does the exit of HP from the market mean for the two remaining computer giants, Apple and Dell?

Dell faces many of the same issues HP faced, as it continues to rely on manufacturing low-end traditional laptops, and the sale of those laptops make up the majority of its profits. Currently, Dell claims operating margins of around 7%, similar to HP’s operating margins before it exited the business.

Apple, however, boasts operating margins of 30%. The boost in Apple’s profits and market share can be explained by its trailblazing products, which are moving computer users away from traditional laptops and towards a smartphone and tablet-based computer era.

Though Dell shipped 10.6 million PCs worldwide last quarter, and Apple only a fraction of that, including iPads in Apple’s shipments boosts the number to 13.5 million for Apple.

HP tried to emulate Apple’s success with the introduction of the TouchPad, but the product only lasted a few weeks on the shelves before its lack of popularity forced it to be removed.

Other companies are finding it hard to compete with Apple’s brand and reputation when it comes to smartphones and tablets, as the iPhone and iPad continue to be the most universally popular options for customers.

However, the exit of HP may actually help Dell, rather than heralding its imminent demise. After all, the iPhone and iPad may be hugely popular among consumers for personal use, but PC makers are still needed for corporations, government accounts, etc.

Thus, Dell could actually pick up some of HP’s market share and slightly improve its profit margins, with Apple also experiencing an increase in market share to cover the rest of the gap left by HP.

Still, the exit of HP shows how the computer business is rapidly changing. Forrester Research predicts that tablet sales next year within the U.S. will outperform netbook sales.

This is especially good news for Apple long-term, as “tablets” are almost automatically associated with iPads. If no one emerges to check the computer giant and provide serious competition in the area of smartphones and tablets, Apple will continue to skyrocket to the top of the market.

Image Source for TouchPad: Wikimedia Commons

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