UPDATE 2-Lenovo knocks HP from top of global PC market -Gartner


(Adds analyst comment, link to video report)

* Research house IDC still ranks HP in the lead * Lenovo shares rise nearly 2 pct in Hong Kong trade * HP stock touches lowest level since October By Poornima Gupta and Lee Chyen Yee

SAN FRANCISCO/HONG KONG, Oct 11 (Reuters) - China's LenovoGroup Ltd edged out Silicon Valley iconHewlett-Packard Co to become the world's No. 1 PC makerin the third quarter, according to data released by researchhouse Gartner on Wednesday.

A rival to Gartner, IDC, still ranks HP in the lead - but byless than half a percentage point - in terms of PC shipmentsworldwide. Both studies reinforce HP's struggles against rivalsas new chief executive Meg Whitman tries to overhaul the stalled73-year-old company.

Worldwide shipments of personal computers fell over 8percent in the third quarter to 87.5 million, the steepestdecline since 2001, Gartner analysts said.

PC demand growth has crumbled over the past year as moreconsumers flock to ultra-portable and increasingly powerfultablets and smartphones for basic computing.

"It's quite a tough year for PC makers because (Microsoft's)

Windows 8 is not launched yet and some consumers arewaiting for that. Cannibalisation of tablet PCs is also anotherfactor," said Eve Jung, an analyst with Nomura Securities inTaipei.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Link to video story: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Both sets of data show that Lenovo, Taiwan's Acerand other Asian PC makers are taking share away from U.S.competitors HP and Dell , which held on to the No. 3spot in the quarter.

Lenovo, which has a market value of $8.2 billion, said itbelieved there was room for continued growth in the sector.

"We are establishing even deeper roots in each major marketaround the world. In addition to localised sales anddistribution teams in major markets, we are establishing an evenstronger manufacturing footprint," Lenovo Chairman and CEOYuanqing Yang said in a statement.

This year the company has bought Brazilian electronics makerCCE, valued at a base price of 300 million reais ($148 million),and U.S. cloud computing firm Stoneware.


Lenovo's rise highlights the advance of China's technologyfirms on the world stage in recent years as a result ofaggressive pricing, overseas acquisitions, and taking advantageof a fast-growing home market.

The Chinese company, which vaulted into the PC market bybuying IBM's personal computer division in 2005, tookthe top spot for the first time by growing its market share to15.7 percent, shipping an estimated 13.77 million units duringthe quarter, up nearly 10 percent from a year ago, Gartner said.

HP's global PC share stood at 15.5 percent after shipping13.55 million units, down 16.4 percent from a year ago, Gartnersaid, adding that this was the first time HP has not been thetop-ranked PC vendor position since 2006.

IDC had HP at the No. 1 spot with a 15.9 percent marketshare, marginally ahead of Lenovo's 15.7 percent share.

HP responded to Gartner's study by saying IDC's was moreexpansive.

"While there are a variety of PC share reports in themarket, some don't measure the market in its entirety," HP saidin a statement. "The IDC analysis includes the very importantworkstation segment, and therefore is more comprehensive."

HP shares closed 1.32 percent lower at $14.18 on Wednesday,after touching $14.02, its lowest level since October 2002.

Lenovo's shares ended up 0.3 percent on Thursday, comparedwith a 0.4 rise in the benchmark Hong Kong index .

Since the start of 2012, Lenovo's shares have risen morethan 9 percent, in contrast to a roughly 40 percent drop in HP'sstock, a 35 percent fall in Dell and Acer's 21 percent slide.

Analysts say PC makers are suffering from still-sluggishgrowth in consumer and corporate spending across the globe, evenin once-reliably hot markets like China, Lenovo's home turf. Theindustry's future is uncertain, partly because of aproliferation of computing devices from tablets of all sizes tosmartphones.

"PCs are going through a severe slump," said Jay Chou,senior research analyst at IDC's Worldwide PC Tracker.

"A weak global economy as well as questions about PC marketsaturation and delayed replacement cycles are certainly afactor, but the hard question of what is the 'it' product forPCs remain unanswered."

(Additional reporting by Tarmo Virki in HELSINKI; Editing byAnne Marie Roantree and Daniel Magnowski)

((poornima.gupta@thomsonreuters.com)(415 677 2536)(ReutersMessaging: Follow me on Twitter @PoornimaGupta))