Today: Hewlett-Packard (HPQ), Microsoft and chip companies see shares descend after reports that first-quarter PC shipments were dismal, but all have a Plan B. Also: Tech's dreary day can't stop Wall Street, Facebook is busy.
PC companies have plans to overcome weakness, stocks plunge
Personal computer companies were predictably punished Thursday on Wall Street, after analysis firms reported Wednesday that the PC industry suffered dramatic losses in the first quarter. Hewlett-Packard, Microsoft and large chip companies like Intel (INTC) have seen the issues in their industry coming, however, and all have plans to diversify their business away from the declining PC industry.
Microsoft took the biggest hit from Wednesday's reports, with an IDC executive overseeing the numbers proclaiming in the company's announcement that "the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market."
"Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market," IDC's Bob O'Donnell later added.
The Washington tech giant is not focusing on the PC market for growth, however, as it continues to build on its mobile efforts. The Wall Street Journal reported Thursday that the company is planning a 7-inch version of its Surface tablet to rival the iPad Mini, part of Microsoft's plan to mimic Apple (AAPL) by selling its own mobile devices, and partnering with Nokia on smartphones.
Microsoft also has its Xbox business to fall back on, and the company showed that it plans for the Xbox to be a big player in television as well by selling its Silicon Valley-based TV-software subsidiary earlier this week. With Windows Mobile devices growing in number and a new Xbox likely being shown off this spring or summer, Microsoft investors can only hope those efforts will provide growth as PC revenues slip.
Video game consoles and TV are also on the minds of Silicon Valley chip companies that have been severely damaged by the PC downturn. Bloomberg News reported earlier this week that struggling Sunnyvale chipmaker Advanced Micro Devices would provide the brains for the new Xbox, and the company has already been announced as the processor producer for Sony's new PlayStation, part of CEO Rory Read's focus on diversifying beyond the PC market.
The industry's biggest player, Intel, is making a big gamble for the television market, possibly challenging Microsoft. Left behind when consumers switched to mobile devices, the Santa Clara chipmaker is only now showing small fruit in the smartphone game, but there is buzz growing behind its efforts to build a new set-top box for the changing television viewer.
Advertising Age published a story this week that included analysts raving about Intel's product, which they reportedly were given behind-the-scenes access to. While other analysts are skeptical about the end product -- "Intel has never really done very well at selling things to consumers," Insight 64 analyst Nathan Brookwood told The Mercury News -- Intel could prove that its chips would be a good investment for any other companies looking to get into the same market.
"Intel could continue to build this into a bigger business going forward," FBR Capital Markets analysts wrote in a recent report.
Santa Clara chipmaker Nvidia has made mobile its focus, and succeeded in placing chips inside Apple and Google (GOOG) tablets so far. While it waits for those efforts to grow, however, Nvidia announced Thursday that it will return $1 billion to shareholders in the form of dividends and stock buybacks, an announcement that helped keep it from losses as severe as its counterparts Thursday.
The company most affected by Wednesday's news is Hewlett-Packard, the world's largest manufacturer of personal computers. The reports from IDC and Gartner both showed that the Palo Alto tech giant's shipments fell more than 23 percent year-over-year in the first quarter of 2013, and its barely holding off Lenovo for the title of top manufacturer, even if that is a shallow victory for a declining industry.
Befitting its worrisome reliance on PCs, HP's plan is multifaceted: While its efforts in software have been embarrassing at times, it still has eyes on challenging Oracle (ORCL) and other titans of that industry, and it also will make a new run at producing smartphones and tablets after the failed TouchPad experiment.
The company also introduced a new line of servers this week that could be a genuine competitor to the cloud revolution. Small in stature and needing much less energy, the company's Moonshot venture has a chance to convince enterprise customers to keep their data on-site instead of renting out servers at gigantic farms or trusting everything to the cloud.
CEO Meg Whitman will continue to throw darts to see what sticks during a turnaround that the former eBay (EBAY) chief concedes will likely take years, but investors are already turning on the company -- again. After seeing its share price rise by more than 60 percent in the first quarter of 2013, shares dropped 6.8 percent to $20.80 Thursday, its lowest closing price in more than a month.
The rest of the group also suffered at the hands of investors Thursday: Microsoft declined 4.4 percent to $28.93, AMD dropped 3.5 percent to $2.52, Intel descended 2 percent to $21.83 and Nvidia decreased 0.5 percent to $33.47. Even Apple, which has proven masterful at selling the types of devices consumers want in the last decade, dropped 0.3 percent to $434.33, as it still makes plenty of notebooks and PCs that would be affected by the industry decline.
Wall Street still gains as Yahoo, Gilead and eBay stay hot
Wall Street still managed to roar to more record highs Thursday despite weakness among those tech titans, as all three major U.S. indexes increased on strong trading in retail stocks, which showed that even a slight gain in sales could be read as a good sign for the future.
Technology stocks not affiliated with the PC industry also had a strong day, helping to push the tech-heavy Nasdaq to a 0.2 percent gain and keep the SV150 index of Silicon Valley's largest tech companies flat. Yahoo (YHOO) and Gilead reached 52-week highs for the second consecutive day, with Gilead gaining 3.9 percent to $51.65 and Yahoo increasing 1.2 percent to $24.49. eBay also reached a 52-week high for a second straight day, as it challenged doubts about PayPal's expansion with an acquisition meant to help the online-payments giant meet any increased demand.
LinkedIn also seemed to get a boost from an acquisition, rising 1.6 percent to $180.18 after its purchase of Pulse was finally announced. And Netflix (NFLX) shot up 4.2 percent after CEO Reed Hastings took advantage of new SEC rules on social-media usage and announced some good news on Facebook, and the company announced a new deal with Hasbro that will get the video-on-demand company more access to streaming kids shows.
Facebook and Mark Zuckerberg have busy day
Facebook and its founder were prominent in the news Thursday, with items ranging from the business side to the political.
The Menlo Park social network announced a new venture for its growing advertising business that will collect data from the physical world to help it verified the "acqui-hire" of mobile software company Osmeta.
Meanwhile, CEO Mark Zuckerberg confirmed earlier reports about an advocacy group focused on immigration and other issues, announcing the arrival of FWD.us, which also includes LinkedIn founder Reid Hoffman, Google Chairman Eric Schmidt, Yahoo CEO Marissa Mayer, and many other Silicon Valley heavyweights. While Zuckerberg proudly boasted of that venture to the Washington Post, he had nothing to say about the other buzz around him and his company, their respective tax bills.
Facebook shares gained 1.6 percent to $28.02.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 2.91, or 0.09 percent, to 3,300.16
The blue chip Dow Jones industrial average: Up 62.9, or 0.42 percent, to 14,865.14
And the widely watched Standard & Poor's 500 index: Up 5.64, or 0.36 percent, to 1,593.37
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.