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PC recovery to continue into H2: Morgan Stanley

TAIPEI, Taiwan -- The global personal computer market is likely to see its recovery continue into the second half of 2014 on the back of better corporate demand and a reduced impact from tablet sales, according to an analysis by brokerage firm Morgan Stanley.

The PC market started to show signs of recovery in the fourth quarter last year and went on to beat market expectations in the second quarter this year thanks to demand in mature and corporate markets and a drop in the “cannibalization” caused by tablets, the brokerage said.

“To sum up, we expect PC recovery in the second half of 2014 to continue but it is likely to stay mild, since ongoing PC refresh on the aging installed base is likely to be offset by a lengthening replacement cycle,” Grace Chen, a Taipei-based analyst with Morgan Stanley, wrote in an Aug. 8 note to clients.

“We believe the expectation for the PC recovery has been increased, so we advise sticking to companies that possess structural positives and are better diversified, which we expect will stand out over the long term,” she said.

Chen recommended Taiwanese contract laptop makers Quanta Computer Inc. (廣達電腦), Pegatron Corp. (和碩聯合) and Wistron Corp. (緯創資通), as well as PC brand Asustek Computer Inc (華碩電腦).

The key to monitoring the PC market during the second half of the year is shipment trends in emerging markets and in the consumer PC segment, she advised.

PC shipments in emerging markets shrank 13 percent year-on-year in the first half of 2014 compared with a 12 percent annual growth in mature markets, according to Morgan Stanley's data.

Research firm Gartner Inc. said in a report last month that worldwide PC shipments saw flat growth in the second quarter of 2014 after eight quarters of decline.

But the PC industry in emerging markets has been impacted by the allure of low-cost tablets, meaning that it will take more time for PC sales to stabilize in those parts of the world, Gartner said.

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