HP and Microsoft tumble after worst PC sales drop

Microsoft and other PC stocks crash
Microsoft and other PC stocks crash

Shares of major personal computer manufacturers, chipmakers and software companies tumbled Thursday after PC sales endured their worst quarter in history.

Hewlett-Packard's (HPQ) stock fell nearly 6.5% to close the trading day, while Dell (DELL) dropped 1.2%. Shares of Intel (INTC) sank nearly 2% and rival AMD (AMD) dropped by 3.5%. Apple (AAPL) slipped just 0.3%.

Microsoft (MSFT) slumped about 4.4% after its shares were downgraded to "sell" by Goldman Sachs Thursday morning.

Shipments of PCs fell 14% worldwide last quarter, according to IDC. It was the worst yearly decline since IDC began tracking the data in 1994.

The drop in PC shipments was nearly twice as bad as the 7.7% decline IDC expected, and it marked the fourth consecutive quarter in which PC shipments fell year-over-year.

Gartner, another technology consultancy, posted similar figures on Wednesday. The analysis firm said 79 million PCs were shipped worldwide in the first quarter -- the fewest number of shipments since the second quarter of 2009.

PC industry titans have tried to innovate themselves out of their sales slump, but recent attempts have failed. Ultrabooks, super-thin notebook computers, debuted to great fanfare in 2011. But sales disappointed, and firms quickly slashed their ultrabook sales forecasts.

In October 2012, Microsoft debuted Windows 8, which received mixed reviews, and sales have been muted compared with past Windows launches.

Bob O'Donnell, a vice president at IDC, said in the company's report that "the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market."

He slammed WIndows 8's "radical changes" to the user interface, particularly the removal of the iconic start button, and intimated that the switch is confusing for customers.

"Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market," O'Donnell said in the report.

CNNMoney Sponsors