HP and Dell face disastrous HDD crisis impact

While the floods in Thailand might have dented Intel, they are more likely to do serious damage to Dell and HP, a market analyst has warned.

After chewing on laurel while perched on a tripod over a volcanic crack, the seers at Trefis predicted that HP could lose a billion in cash next year thanks to Intel being hit.

It thinks that a billion in lost revenues for Intel could roughly amount to a $5 billion loss for the other PC makers.

Intel’s market share in the PC processor market is close to 80 percent for desktops and notebooks combined, and the total loss for overall microprocessor market could be even higher at around $1.25 billion as other players like AMD and Nvidia also take a hit. This would mean a potential revenue loss of $6 billion with PC pricing at five times that of processors for PC vendors.

All this is particularly bad for the maker of expensive printer ink HP which is still the leader in the PC market. More than 18 percent of its revenue depends on worldwide PC shipments. HP will miss out on revenues worth $1.1 billion out of the total $6 billion revenue loss for the market as a result of the current hard disk drive supply crisis.

Trefis notes that PC shipments may be hit by as much as 10 percent in the fourth quarter of 2011 which leads to similar figures of $6 billion revenue loss for PC makers using an average PC price of $600.

However, it looks like the worst will come in the first quarter of 2012, when the total PC shipments could be depressed by more than 20 percent in Q1 2012 as HDD prices rise sharply due to supply-demand mismatch. This will kill off more cash for firms like HP and Dell.

Trefis added that while HP is the largest PC maker, it expects the impact of the crisis is going to be bad for Dell which is much more dependent on its PC business. It predicts that Dell shares will take a battering, be deep fried and liberally sprinkled with salt and vinegar next year.