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.

That might sound a little melodramatic, given that the recorded history of PC shipments only goes back to 1994. But with a drop of 13.9 percent — almost double the expected 7.7 percent — to only 76.3 million units, the first quarter of 2013 has been a disaster for traditional PC manufacturers.

Even a new version of Windows, once a guaranteed shot in the arm for PC shipments, failed to stimulate demand. Quite the opposite.

“At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market,” Bob O’Donnell, an IDC vice-president, said in a statement.

O’Donnell says that with its radical user interface changes, subtraction of the familiar Start button, and extra costs that come with Windows 8-equipped PCs that take advantage of its touch capabilities “have made PCs a less attractive alternative to dedicated tablets and other competitive devices.”

Ouch.

In the U.S., this marks the tenth consecutive quarter of year-on-year declines, and quarterly shipments reached their lowest level since early 2006. Europe was down as well, and even growing China and the rest of the Asia Pacific region dropped 12.7 percent, the first double-digit decline in PC shipments there.

HP remains the top PC vendor globally, IDC said, but its shipments fell 23 percent year-over-year, and it was almost surpassed by Lenovo, which astonishingly had double-digit growth in a sinking market. Dell dropped 10 percent as well, and Acer, Asus, and Toshiba also dropped somewhat.

Even Apple, which has seen strong growth in recent years, particularly in laptops, had shipments decline 7.5 percent to 1.4 million.

IDC seems interested in blaming Windows 8, but the more likely culprit is surging sales of tablets, which some analysts are including in “PC” shipment numbers. In fact, some analysts believe that this year is the year tablet sales will outpace traditional PC sales, with quarterly sales of 55-60 million.

Given this quarter’s numbers, it looks like the crossover point could be as soon as the next three months. But whether that happens or not, big changes are in store for PC vendors:

“The industry is going through a critical crossroads, and strategic choices will have to be made as to how to compete with the proliferation of alternative devices and remain relevant to the consumer,” David Daoud, IDC Research Director, said in a statement. “Vendors will have to revisit their organizational structures and go-to-market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation.”

photo credit: amygentle77 via photopin cc

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.

With tablets eating into PC sales, maintaining growth has been tough business for PC vendors.

And yet Lenovo is still going strong. The company posted fourth quarter 2012 sales of $7.5 billion, an increase of 54 percent over the previous quarter. This is the twelfth consecutive quarter that the company has posted growth.

Over half of this income came from Lenovo’s laptop PC business, which accounted for $4.2 billion on products like the ThinkPad XI.

For the whole year, Lenovo’s overall PC shipments climbed 35 percent as the rest of the industry grew just three percent. Yearly sales were at $29.6 billion.

The biggest news is Lenovo’s PC market share, which has crept  to 12.9 percent. With the increase, Lenovo has jumped from fourth place in the global PC market to second — all within a year. That places the Chinese company right on the heels of HP, which commands 17 percent of the market, according to Gartner.

Much of this growth is owed to China, where Lenovo holds 30 percent of the market. 39 percent of Lenovo’s  total sales came from China alone, which shows just how important the company’s home turf is to its bottom line.