Today: Apple (AAPL) and Hewlett-Packard (HPQ) gain despite IDC reports predicting an even larger decline in personal computer shipments and a slowdown in tablet growth. Also: Tesla takes big Wall Street turn as Silicon Valley stocks move higher.
The Lead: PC sales seen falling farther, tablet sales leveling; Apple, HP gain
Apple and Hewlett-Packard, the two largest tech companies in Silicon Valley, enjoyed gains Tuesday on Wall Street despite fresh IDC data that shows a worsening decline for personal-computer demand and a slowing growth curve for tablets.
Apple shares surpassed 2013 highs established on Black Friday with a 2.7 percent gain to $566.32, and HP came within a penny of its 52-week high of $27.78 before closing with a 0.7 percent gain at $27.50. An IDC report released Tuesday has big doubts about the future of PCs, however, an area that Apple and HP still rely on for revenues.
IDC reported that PC shipments are now expected to suffer "by far the most severe yearly contraction on record" in 2013, with updated projections showing a 10.1 percent decline for PCs that could signal the final gasping breaths of the PC era.
The biggest issue is apparently old Windows and Mac laptops that just won't die, leading to a 15 percent reduction in consumer sales.
"Perhaps the chief concern for future PC demand is a lack of reasons to replace an older system," IDC senior research analyst Jay Chou said in Tuesday's news release.
HP has been overtaken as the king of personal computers by Lenovo, and is focusing on increasing its software and service offering while pushing toward new frontiers for new revenues -- 3D printers, anyone? Apple, which does not crack IDC's top 5 PC manufacturers worldwide but is third for domestic sales, derives the bulk of its revenues from smartphones and tablets now, but a second IDC report may cast a shadow on one of those markets.
The analysis firm's quarterly tablet tracker foresees slowing growth in tablet shipments over the next four years, and its forecasts are already beginning to shrink: After earlier seeing 227.4 million tablet shipments in 2013, IDC reduced that number to 221.3 million Tuesday. IDC says the tablet market will likely peak in 2017, when growth slows to single digit percentages and peak annual shipments will hit 386.3 million units, down from earlier projections of 407 million.
"In some markets, consumers are already making the choice to buy a large smartphone rather than buying a small tablet, and as a result we've lowered our long-term forecast," IDC research director Tom Mainelli said Tuesday. "Meanwhile, in mature markets like the U.S. ... we're less concerned about big phones cannibalizing shipments and more worried about market saturation."
Apple's share of the market is expected to decline as growth slows as well, a concern for investors looking for ways the company can continue to increase revenues despite record-breaking sales the past two years. Issues with tablets and PCs could put more pressure on the performance of the iPhone, which already accounts for more than half of Apple revenues.
Investors may have been cheered on that front Tuesday by a report that indicated the possible imminent arrival of the long-rumored deal between China Mobile -- the world's largest mobile carrier -- and Apple. UBS analyst Steven Milunovich credited anticipation of a deal with China Mobile while increasing his price target on the stock Tuesday from $540 to $650, and added that institutional investors could flood back into the stock in 2014. Milunovich's positive report adds to a wave of solid analyst notes for Apple that arrived after the long holiday shopping weekend, which was capped off with a record-breaking Cyber Monday.
Semiconductor companies may have been affected by the IDC reports: Intel (INTC), which recently swore its allegiance to the tablet market, fell 0.6 percent to $23.55 Tuesday despite a fresh acquisition; Advanced Micro Devices, which has its chips in both the recently released next-generation gaming consoles, declined 1.1 percent to $3.62; and Applied Micro fell 4 percent to $11.92.
SV150 market report: Tesla zooms higher, taking SV150 along for ride
Wall Street declined for a second consecutive day Tuesday, as doubts about a Black Friday boost continued despite strong sales reports from carmakers. A big gain from Silicon Valley's biggest auto manufacturer, Tesla Motors (TSLA), combined with Apple and HP's push to help the SV150 record a solid gain on the day.
Tesla gained 16.5 percent to $144.70 Tuesday after the company announced a German inquiry into two recent Model S fires had ended with no concerns and a Morgan Stanley analyst called it the top auto stock to target, reversing a downhill ride that took the stock from a record intraday high of $194.50 Sept. 30 to as low as $116.10 in late November, a decrease of more than 40 percent. German investigators found "no manufacturer-related defects" that would cause the recent Model S fires that have also sparked an investigation from U.S. authorities. Morgan Stanley analyst Adam Jonas wrote that Tesla's recent 40 percent slide on Wall Street took it "from 20 percent overvalued to nearly 20 percent undervalued in just two months." and named it his top pick among 26 U.S. automakers.
eBay (EBAY) continued to move higher after reports of heavy traffic and sales on Cyber Monday, with the San Jose online retailer recording gains of 1.1 percent to $51.93 Tuesday. Twitter gained 1.5 percent to $41.37, continuing success that may be sparking a new wave of investment in social companies, but rival Facebook fell 0.7 percent to $46.73 while phasing in an "Unfollow" button. Google (GOOG) declined 0.1 percent to $1,053.26 while attempting to beef up its patent portfolio as well as its server-space rental business, the latter of which seemed to harm rivals on Wall Street. Netflix (NFLX) fell 0.3 percent to $362.94 after announcing a release date for its first original series for children, which will not debut all at once like the Los Gatos video-on-demand company's previous offerings.
After the bell, two SV150 companies released earnings, with investors' reactions peeling off in opposite directions. Santa Clara-based Omnivision fell more than 13 percent in late trading after the image-sensing device company reported profits of $26.3 million, or $0.47 a share, on revenues of $397.2 million. Foster City-based GuideWire Software gained as much as 6 percent in after-hours action after the insurance-focused software company's earnings beat expectations despite a loss of $10.6 million, or 18 cents a share, on revenues of $66.5 million.
Up: Tesla, SolarCity, Apple, Twitter, eBay, Cisco (CSCO), VMware, HP, Yelp, Juniper, Symantec, Intuit
Down: Zynga, Workday, Gilead, LinkedIn, Electronic Arts (ERTS), Yahoo (YHOO), AMD, Facebook, Adobe (ADBE), NetApp, Intel
The SV150 index of Silicon Valley's largest tech companies: Up 6.14, or 0.43 percent, to 1,439
The tech-heavy Nasdaq composite index: Down 8.06, or 0.2 percent, to 4,037.20
The blue chip Dow Jones industrial average: Down 94.15, or 0.59 percent, to 15,914.62
And the widely watched Standard & Poor's 500 index: Down 5.75, or 0.32 percent, to 1,795.15
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/jowens510.
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