Today: Hewlett-Packard settles charges of foreign bribery, and research firms say that the personal-computer industry's decline continued in the first quarter. Also: Tech stocks' recovery booms with social networks leading the way.
The Lead: Personal computers shipments decline again as HP pays bribery fine
In a rough day for Hewlett-Packard, the Palo Alto tech giant agreed Wednesday to pay more than $100 million to resolve foreign bribery allegations, then learned that the personal computer industry completed two straight years of declines despite the demise of Windows XP.
HP and the Justice Department announced the $108 million settlement Wednesday, which was the result of bribes paid in Russia, Mexico and Poland that totaled nearly $4 million. Federal investigators' recap of the company's malfeasance included taking a Polish official on a ritzy visit to Las Vegas after handing over bags of cash, funneling laundered cash and goods like "swimming pool technology" to Russian officials, and paid a kickback to secure contracts with Mexican oil giant Pemex.
HP said in its announcement that the bribery "was limited to a small number of people who are no longer employed by the company." Other Silicon Valley companies are under investigation for similar schemes, including Juniper Networks and Cisco, which has confirmed that it is examining possible bribery involving its operations in Russia.
After dealing with the fallout of that announcement Wednesday morning, HP received new reports on the state of the PC industry after trading closed Wednesday afternoon. Gartner and IDC released their latest quarterly reports on the sector, which showed that PC shipments declined year-over-year for the eighth consecutive quarter, though gave some hope for the future.
"While the PC market remains weak, it is showing signs of improvement compared to last year. The PC professional market generally improved in regions such as (Europe, the Middle East and Africa). The U.S. saw the gradual recovery of PC spending as the impact of tablets faded." Gartner principal analyst Mikako Kitagawa said in Wednesday's news release.
Gartner reported that the PC market overall dropped 1.7 percent from the same quarter a year ago, while IDC reported a 4.4 percent drop. The performance was actually stronger than expected, as international enterprise sales gained, presumably thanks to Microsoft ending support for Windows XP this week, forcing an upgrade for users still on that version of the company's operating system.
"The end of XP support by Microsoft on April 8 has played a role in the easing decline of PC shipments," Kitagawa wrote. "All regions indicated a positive effect since the end of XP support stimulated the PC refresh of XP systems."
On the positive side for HP, the company's shipments grew more than 4 percent worldwide in the first quarter, according to both research houses. On the negative side, that growth was easily outpaced by its two largest rivals: Lenovo, which took the crown of top PC manufacturer from HP in 2013, grew shipments more than 10 percent; and HP's largest American rival, Dell, increased shipments 9.3 percent according to IDC and 9 percent according to Gartner.
Dell's gains could be especially worrisome to HP and its investors: The Texas company boosted shipments in the United States by more than 13 percent according to both reports, while HP's U.S. sales growth was below 2.5 percent and Apple shipments declined year-over-year. The gap in U.S. market share between HP and Dell shrank to 1.1 percent or 1.2 percent, depending on the reporting company.
Dell's "revamped channel strategy -- with greater focus on partners and solutions as well as use of PC sales as part of broader solutions -- is paying dividends as the company benefits from the relative strength of commercial replacements as well as operational freedom and reduced uncertainty after completing the privatization," IDC reported.
Hewlett-Packard stock gained 0.8 percent Wednesday to $32.72, and didn't seem to be affected in after-hours trading.
SV150 market report: Tech stocks continue rebound, led by social media
HP's gains on Wall Street seemed small compared with big boosts for other Silicon Valley companies, as tech stocks shot higher Wednesday while continuing to recover from bear market turns that cost some of the region's elite billions.
The social media sector, which was hit hard in the downturn, enjoyed some of the largest gains Wednesday. Facebook had the third largest percentage gain in the SV150, improving 7.3 percent to $62.41 after COO Sheryl Sandberg denied political ambitions in a morning show interview. The Menlo Park social network received upbeat appraisals from a handful of analysts, including SunTrust Robinson Humphrey's Robert Peck and Susquehanna's Brian Nowak, as well as JPMorgan's Doug Anmuth, who suggested that the recent sell-off offers an opportunity to pick up shares of Facebook and Pandora. LinkedIn roared 4.2 percent higher to $176.18 after Topeka Capital Markets analyst Victor Anthony raised his grade on the company from "Hold" to "Buy," writing that the Mountain View professional-networking company "possesses one of the best business models on the Internet, with a high-growth, low risk, three-pronged revenue stream, each with the potential to become billion dollar businesses." Other social stocks that rebounded from recent weakness included Yelp, which gained 6 percent to $71.25, and Twitter, which rose 1.7 percent to $42.49.
Yahoo gained 3.1 percent to $34.87 after hiring makeup maven Bobbi Brown, a move, one journalism expert told The Guardian, that "creates an absolutely obvious conflict of interest." Apple gained 1.3 percent to $530.32 amid a report that key software executive Greg Christie will leave, and Netflix rose 1.2 percent to $353.03 as rival Amazon announced two new drama series it will produce. Cisco rose 0.8 percent to $23.12 and VMware dropped 1.2 percent to $106.40 after Goldman Sachs said in a note that the two Silicon Valley companies will be leaders in the software-defined networking space. Intuitive Surgical suffered the biggest drop in the SV150 on Wednesday, declining 6.8 percent to $456.64 after announcing that first-quarter revenues would not live up to expectations.
Up: Facebook, Yelp, Pandora, LinkedIn, SunPower, Salesforce, Yahoo, SolarCity, Adobe, Workday, eBay, NetApp, Google, Twitter, Zynga, Oracle, Apple, Netflix
Down: Intuitive Surgical, Electronic Arts, VMware, Advanced Micro Devices, Nvidia, Sandisk
The SV150 index of Silicon Valley's largest tech companies: Up 22.9, or 1.66 percent, to 1,405.09
The tech-heavy Nasdaq composite index: Up 70.91, or 1.72 percent, to 4,183.9
The blue chip Dow Jones industrial average: Up 181.04, or 1.11 percent, to 16,437.18
And the widely watched Standard & Poor's 500 index: Up 20.22, or 1.09 percent, to 1,872.18
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.