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PCs showing 'severe slump' as HP slips to No. 2

The worldwide computer market tumbled more than expected in the third quarter, but Lenovo edged past HP to take the top spot, according to Gartner. IDC, however, still has HP in the lead, but just barely.

Peter Hortensius, president of Lenovo's product group, and David Schmoock, president of Lenovo's North American operations, demo the company's new Windows RT convertible PC at a New York event. Rich Brown/CNET
It's even uglier than thought in the PC market, new data today shows.

IDC says the global computer market "withdrew sharply" in the third quarter, with shipments falling 8.6 percent from the prior year. The tech research firm had expected a decline of just 3.8 percent -- what it called a relatively quiet quarter as companies prepare for the upcoming Windows 8 launch.

Rival Gartner, meanwhile, said shipments slid 8.3 percent to 87.5 million units, worse than its expectation for a 6.5 percent decline.

Both firms noted that back-to-school promotions weren't enough to drive sales, something that showed the "vulnerability of PCs and the loss of mindshare among buyers," according to IDC. Tablets and smartphones have been putting pressure on the market, as has uncertainty over the global economy and the impact of Windows 8.

Here's what Jay Chou, IDC senior research analyst, had to say about the steep drop:

"PCs are going through a severe slump. The industry had already weathered a rough 2Q12, and now 3Q12 was even worse. A weak global economy as well as questions about PC market saturation and delayed replacement cycles are certainly a factor, but the hard question of what is the 'It' product for PCs remains unanswered. While ultrabook prices have come down a little, there are still some significant challenges that will greet Windows 8 in the coming quarter."

PC market growth has slowed of late as consumers, cautious about the global economy, hold off on computer purchases in favor of mobile devices. Intel, which has been driving the move to thin-and-light PCs dubbed ultrabooks, last month cut its revenue guidance for the third quarter by about $1 billion. At the time, the chip giant said it was seeing "weaker than expected demand in a challenging macroeconomic environment."

Other grim news today came from IHS iSuppli, which said PC shipments will fall in 2012 for the first time since the dot-com bust in 2001. The firm also cited a disappointing back-to-school period and uncertainty about the newest version of Windows.

Loren Loverde, an analyst with IDC, told CNET that his firm will be reevaluating its forecast for the full-year, as well. The firm typically updates its guidance when it receives final data for the quarter. IDC in August had projected the worldwide PC would grow 0.9 percent in 2012.

"I can safely say that these results are several points below our forecast, and we'll definitely need to bring down our forecasts, especially for 2012," he said. "It certainly will push us into negative territory for the year."

Gartner analyst Mikako Kitagawa, meanwhile, said Gartner now expects the PC market to be about flat from 2011. The firm previously estimated 2 percent growth for 2012, Kitagawa said.

Lenovo is No. 1?
The data today from Gartner and IDC were pretty similar, but they differed on one key point -- which company shipped the most computers. Gartner put Lenovo in the top spot with 15.7 percent of shipments, beating long-time incumbent Hewlett-Packard.

IDC, meanwhile, estimates that HP held on to the No. 1 position with 15.9 percent of the worldwide PC shipment market share, though Lenovo was close on its heels at 15.7 percent.

HP in a statement said some PC share reports don't measure the market in its entirety. The company said IDC's forecast includes "the very important workstation segment and therefore is more comprehensive."

HP, which saw its global shipments drop 16 percent from the previous year, according to both firms, has faced a tough time in the PC market of late. The companyconsidered exiting computers to focus on high-margin enterprise businesses like storage, but it later backtracked on that plan.

IDC noted that "distractions caused by its reorganization, challenges in integrating its enterprise acquisitions, and an unclear strategy to regain its course remain key obstacles."

Lenovo, meanwhile, has been benefiting from its high exposure to the Chinese market and its strong operation selling computers to business users. The company yesterday unveiled several new convertible PCs it expects to appeal to consumers and businesses.

IDC and Gartner today said Lenovo's shipments rose about 10 percent globally in the third quarter. It also was the only PC maker on the list to post an increase in shipments in the U.S., with a 9.2 percent rise according to IDC, and a 6.1 percent rise according to Gartner. HP dropped about 19 percent in the U.S., and Dell fell 16 percent. Apple's shipments slid about 6 percent to 7 percent.

"A continuing slowdown in consumer PC shipments played a big part in the overall PC market decline," said Gartner's Kitagawa. "The third quarter was also a transitional quarter before Microsoft's Windows 8 operating system release, so shipments were less vigorous as vendors and their channel partners liquidated inventory."

Updated at 3:40 p.m. PT with Gartner's forecast for 2012 and a comment from HP.