What do IDC 3Q11 results say? ::Macquarie Research,

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What do IDC 3Q11 results say?
Event
 IDC released its 3Q11 preliminary worldwide PC shipment results. While
Lenovo surpassed Dell to be the 2nd largest PC vendor, Asustek also replaced
Toshiba to stand in the no. 5 position globally. Acer remained the weakest
among the top 5 brands.
 While the slowing consumer demand was well anticipated by the street, IDC
data tell us that commercial markets in the U.S. and Europe were also not
good.
Impact
According to IDC, 3Q11 worldwide PC shipment growth came in at 9.4% QoQ
or 3.6% YoY (see Fig 1). Among the top 5 PC brands, Lenovo and Asustek’s
worldwide PC shipments grew strongly by 36% and 30% YoY, respectively
while Acer dropped significantly by 21% YoY.
 Emerging countries lead the global PC growth: Overall 3Q11 PC demand
was slow in the U.S. (flattish YoY) and Europe while Asia Pacific shipment
growth remained strong at double-digit % YoY. The back-to-school demand in
Europe and the U.S. was weaker than the expectation. We expect Lenovo
and Asustek to continue benefiting from their high exposure to emerging
countries and low-base growth opportunity in Asia (excluding China), and
Latin America.
 Commercial demand below expectation: While consumer PC demand was
affected by shifts in customer spending to tablets or smartphones, IDC data
also show that the commercial segment in Europe and the U.S. was weaker
than the expectation. Dell’s worldwide and U.S. PC shipment growth in 3Q11
came in at -1.6% and -7% YoY, respectively, which also reflected the IT
budget control by its commercial clients due to the slowing economic
environment.
 Scale remains the key to margins: While we believe PC is a scale business,
we expect Lenovo and Asustek’s rising shipments to help reduce their cost
structure and hike margins. We also expect Intel and Microsoft to offer better
marketing dollar sponsorship and technical support to companies, helping
their profitability and brand awareness going forward.
Outlook
 We maintain our neutral view on the NB sector. We expect PC demand in the
short term to remain slow despite YoY shipment growth showing some
improvement. We believe Ultrabook may trigger some replacement demand
from 4Q11 but we think Win 8 will be the main driver to help PC demand
recovery from 2H12.
 On brand, we still prefer Asustek (2357 TT, OP, TP: NT$330) and Lenovo
(992 HK, OP, NT$6.5) over Acer (2353 TT, UP, TP: NT$23). On NB ODM, we
like Pegatron (4938 TT, OP, TP: NT$36) which is Asustek’s major supplier
and has a good opportunity to increase its shipments to Lenovo/Medion.