Lenovo: Measuring The PC Market Collapse (INTC)(AMD)(NVDA)(GOOG)(MSFT)

PCs are so well-made now that they do not have to be replaced until they break. The processors put in computers made two years ago are still powerful enough for most consumer and business use. Server-side applications like the ones sold by Google (GOOG) allow PCs to operate without much of their capacity being taxed

The key reason that many people used to have for upgrading their PCs was to get ahold of Microsoft’s (MSFT) newest operating system. The latest one, Vista, is almost universally hated. It is hard to get consumers and businesses to buy something they despise.

Lenovo, the PC operation based in China, just lost a lot of money and its CEO took the long walk. The company had a deficit of  $96 million last quarter and will probably lose more in the current period.

The Lenovo news is more confirmation that selling computers is getting to be a bad business. People and enterprises will wait months and perhaps a year to replace a machine. That could do more damage to the industry than most analysts have said.

The PC industry slowdown effects dozens of large businesses. Chip companies including Intel (INTC), AMD (AMD), and Nvidia (NVDA) may have worse earnings that even their new, lower expectations would say. Microsoft (MSFT) is still months and perhaps quarters away from launching Windows 7. Even if it is well reviewed, there may not be buyers in the market to drive demand.

The PC has become a commodity, and it is showing.

Douglas A. McIntyre