Is the PC market shrinking? Not if you’re Lenovo.

Over the past few quarters, Lenovo’s PC sales have remained steady, even as the larger PC market itself has declined. Its latest quarter is no exception: The company’s net income increased to $126.9 million from $66.8 million last year.

Those numbers come as Lenovo’s share of the PC market increased to 15.3 percent, according to an April report from IDC. In fact, Lenovo was the only top PC company to post a gain in PC shipments rather than a decline, says IDC.

Lenovo’s PC sales contrast strongly with those of industry leader HP, which last quarter saw its PC and notebook shipments decrease 18 percent and 24 percent, respectively. At 15.7 percent, HP’s share of the PC market is just barely higher than that of Lenovo — though not for much longer this rate.

Lenovo’s numbers were also boosted by sales of its smartphones, which are sold in countries like India, Russia, and Indonesia. Lenovo is the second-largest smartphone vendor in China behind Samsung, and it expects its global smartphone shipments to increase to 50 million this year. Lenovo may be mostly a PC company, but it’s pretty clearly showing it wants to be so much more.

In addition to running companies, most CEOs have mastered a greater, more common art: giving lengthy interviews wherein they say nothing at all.

Microsoft CEO Steve Ballmer is an exception to that, or at least he was in his recent interview with MIT Technology Review. His most interesting view? He doesn’t foresee the Surface taking over the world.

“In an environment in which there’s 350 million PCs sold, I don’t think Surface is going to dominate volume, but it’s a real business,” he said in the interview.

Ballmer’s view, while obvious to anyone who’s ever used the Surface (or pays attention to PC sales numbers), is a refreshingly realistic take on the situation that the Surface finds itself in. While shrinking, the PC market is huge, and the Surface is just a tiny part of it. Ballmer is really just trying to temper expectations.

But the mission behind the Surface is greater than just raking in cash for Microsoft. From the beginning, the device was meant to serve as an example for Microsoft’s hardware partners, who have had a mixed track record with the transition to Windows 8.

Essentially, the Surface is central to Microsoft’s position at the center of the Windows PC market — regardless of how well the device itself sells.

Photo: Devindra Hardawar/VentureBeat

If the PC market is shrinking, Lenovo so far appears to be immune to the trend.

The Chinese electronics company sold 14.1 million PCs last quarter, thanks largely to its continuing success in China and other emerging markets.

In fact, this is the fifteenth straight quarter where Lenovo’s PC business grew even as the greater PC market has shrunk. That feat helped Lenovo report a gross profit of $205 million on $9.4 billion in revenue. Not bad for a company that conventional wisdom says should be floundering.

Lenovo’s sparkling results stand in contrast to the resentment-soaked PC shipment numbers that Acer reported this week. While Windows 8 is working out pretty well for Lenovo, Acer can’t say the same. And it’s pretty bitter about it.

“The whole market didn’t come back to growth after the Windows 8 launch. That’s a simple way to judge if it is successful or not,” Acer president Jim Wong told Bloomberg yesterday.

So how do you explain Lenovo’s success? Pretty simply, really: Its devices don’t stink. In fact, Lenovo’s IdeaPad Yoga is the best Windows 8 device I’ve used so far. That device, along with the rest of Lenovo’s early Windows 8 PCs, shows that consumers do respond positively when companies create high-quality hardware.

Something tells me Acer is pointing its indignant finger in the wrong direction.

Major semiconductor company Advanced Micro Devices has substantially sliced orders to chip manufacturer GlobalFoundries because it expects a “choppy demand environment” for PCs in 2013.

AMD previously contracted to purchase about $500 million in wafers from GlobalFoundries in the fourth quarter, but it has now lowered that to just $115 million. AMD’s contract now sits at $1.15 billion for fiscal 2013. Amending its contract with GlobalFoundries will cost AMD a penatly of about $320 million.

The trouble with AMD shouldn’t be too surprising to those paying attention. Global PC shipments will fall by 1.2 percent in 2012, according to the latest estimates by IHS iSuppli. Two major factors are likely to blame to the decline — a shaky economy and the adoption of mobile devices like smartphones and tablets that are supplanting PCs.

Since January, AMD’s stock price has dropped more than 60 percent, and there are persistent rumors that it’s looking for someone to buy it. A recent report also suggests AMD plans to sell its 58-acre Austin, Tex. campus.

AMD chip photo via Don Scansen/Flickr

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Leave to HP chief executive Meg Whitman to give it to you straight on HP’s PC design failures.

“I don’t think we kept up on innovation,” she said in an interview with the Wall Street Journal. “The whole market has moved to something that is more beautiful.”

Whitman was, of course, referring to devices like the MacBook, whose simple design has helped Apple steal away lots of PC buyers from the likes of HP and Dell.

To strike back, HP has a simple strategy: Create computers that are not only well-designed, but also distinctly its own.

To do so, however, HP is going to have to avoid creating more devices like the Spectre One, an all-in-one PC that’s been highly criticized for looking a bit too much like Apple’s iMac.

Either way, regaining its footing in the PC market is a key move for the struggling company, which is under pressure on multiple fronts. Not only is the company losing ground with the dawn of the “post-PC era”, but it’s also taking a beating from Chinese rival Lenovo, which is drawing ever closer to taking HP’s top PC vendor crown.

And both of those things are bad for HP’s bottom line. PCs are the company’s biggest money-maker, representing about 30 percent of its revenue. So it’s not a surprise to see Whitman and her company taking things so seriously.

Whitman herself has been a busy woman in recent days, having last week given Fox Business News the scoop on HP’s smartphone plans. “We did take a detour into smartphones, and we’ve got to get it right this time,” she said. The company’s smartphone strategy, however, has yet to be determined.