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'Dell'wether: Does the desktop decline point to an era's end?

By Ramy Inocencio, for CNN
updated 8:50 AM EDT, Fri May 17, 2013
A woman operates one of the early desktop IBM computers in this photo from 1955. Today, desktop and laptop computers are on the decline as consumers flock toward tablet devices. Dell's first quarter profit plunged 79% because of slower PC sales.
A woman operates one of the early desktop IBM computers in this photo from 1955. Today, desktop and laptop computers are on the decline as consumers flock toward tablet devices. Dell's first quarter profit plunged 79% because of slower PC sales.
STORY HIGHLIGHTS
  • Dell says first quarter profits fall nearly 80% on slump in desktop, laptop sales
  • Analyst: 'PC industry throwing darts at the board to see what sticks'
  • Gartner: PC shipments fell 11% year on year in the first quarter
  • Dell attempting to shift from personal computers to "enterprise solutions" focus

Hong Kong (CNN) -- Dell, the world's number three PC maker, reported Thursday a 79% profit plunge for the first quarter of the year -- to just $130 million -- owing to a slump in desktop and laptop sales, so-called "end-user computing" products. Quarterly operating income for the division fell 65% year on year.

"In the PC industry, everyone is struggling -- not just Dell -- and especially in the mobile PC market," says Craig Stice, Senior Principal Analyst at U.S.-based Compute Platforms. "When I look at those (Dell) revenues split between mobility and desktop, they're really not too far out of line with where the industry is at. The entire PC market struggled in Q1."

Technology research firm Gartner estimated 79 million PC shipments occurred in the first quarter of 2013 -- a fall of more than 11% year on year. HP saw a 24% drop in PC shipments, Dell fell 11% while Taiwan-based Acer Group fell nearly 30%.

The fall in global PC shipments contrasted with a rise in tablet volumes, according to IDC, an IT market research firm. From January to March this year, Apple shipped nearly 20 million units to be the world's number one tablet maker; Samsung shipped nearly 9 million units for second place. The world's top five tablet computer companies shipped more than 49 million units to record 142% growth year on year.

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Dell has been trying to counter losses in its PC division by shifting to enterprise solutions, which includes hardware like computer servers, software for business applications and technical support to service clients.

Dell's quarterly operating income for the enterprise division soared 71% to $79 million but contributed just 8% of the company's total income.

"Enterprise solutions are significant growth opportunities," says Stice. "The margins are certainly better than the PC area -- high single digits to the low teens -- versus the enterprise space which is considerably higher."

In terms of hardware units sold for enterprise solutions, HP has traditionally been number one, with Dell and IBM rounding out the top three, adds Stice.

Still, the future seems anything but bright for the PC industry despite a flurry of attempted innovations, from super-thin and light ultrabooks to convertible PCs that can morph into tablet forms.

"Dell was a bit slow to the Ultrabook game and lost to players like (Taiwan's) Asus and Acer," says Richard Lai, Editor-in-Chief of Engadget Chinese. In addition, Dell's dive into convertible laptops "was rather half-hearted: poor screen, too bulky."

"You can kind of say the PC industry is throwing darts at the board to see what sticks," says Stice. "If they can find that combination of a whole computing performance PC, with mobility and a low price point to compete with some of those $200 media tablets, then I think there's opportunity. There's still an opportunity for a PC refresh cycle. That can happen."

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