Welcome to the PC Roach Motel

 | Oct 11, 2012 | 9:30 AM EDT
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So it had to happen. A day after I wrote about the coming margin compression at Intel (INTC), PC research firm Gartner dropped the hammer down on the whole personal-computer group.

Face it. It's over. Done. Finished. Pack it up. Turn out the lights. The entire Wintel personal computer space is totally un-investible. If I see Maria interview Michael Dell one more time on CNBC, I think I'm going to lose my lunch!

Wednesday, after the close, Gartner said worldwide PC shipments in the third quarter declined 8.3% to 87.5 million units. Then, to add insult to injury, IHIS iSupply said PC shipments for all of 2012 year would decline 1.2% to 348.7 million units. Not since 2001 has the worldwide PC industry suffered a year-over-year unit decline.

Look, I know. 350 million units is a lot of stuff to sell. But it's the change of the change -- the second derivative -- that drives the stocks. Many techie blogs I've seen have already panned Microsoft's (MSFT) Windows 8 and are already looking forward to some type of interim fix. PC aficionados seem to have their hopes pinned to a super fantastic Windows 8 release. But it doesn't seem like that will happen. When there's no hopey and no changey, you got nothing.

Gartner also named Chinese PC maker Lenovo as the No. 1 PC vendor in the world. Lenovo was able to achieve that prestigious status by aggressively slashing prices on PCs headed into the enterprise market. Well, that's great. Gigantic price cuts to move the metal. Cubicle workers the world over will rejoice when they get their new machines. Now they'll have a new PC to complain about. ("Hey, why can't I get this thing to print?")

Lenovo grew shipments by 9.8%, while Hewlett-Packard (HPQ) slid into second place on a 16.4% decline in shipments. Perhaps HP tried to salvage a shred of dignity and not chase Lenovo down the rat hole of margin compression? Who knows? (I'm sure management will brag about it on the conference call.)

Why am I so pessimistic on the group? Dell (DELL) has a 6.4% trailing 12-month operating margin and a 5.6% return on assets. Hewlett-Packard has a 7.5% operating margins and a 4.7% ROA. By contrast, IBM (IBM) ingeniously dumped the desktop business in the trashcan and offloaded the laptop business to Lenovo. IBM has a 21% operating margin and a 12% return.

Of course, no one in the business can touch Apple's (AAPL) 35.6% operating margin and 25% return on assets. Right now there is some $44 billion rotting away in Dell and HP -- with no end in sight. What is the solution? Copy IBM? Copy Apple? There's no easy answer. Last week, HP CEO Meg Whitman said she didn't think the company would turn around until 2014. So I'm supposed to watch my investment go down the drain until things get better? No way, lady. Sell "crazy" somewhere else. We're all stocked up.

To me, Dell and HP are value traps. Both of them are roach motels. Investors get in, but they can't get out. Stay away.

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