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March 09, 2006

PC Shipments To Slow - Report

Courtesy of TechWeb News

Worldwide growth in PC shipments is expected to slow significantly this year, as fewer people are projected to replace their desktop computers, a market research firm said Thursday.

Shipments in 2006 are expected to increase by 10.7 percent over last year to 234.5 million units, Gartner Inc. said. In 2005, shipments rose by 15.5 percent over the previous year to 211.8 million units.

The slowdown is primarily due to the drop in desktop shipments in the United States, Europe and other mature markets, which as a whole are expected to see a decline of 8.6 percent this year, the research firm said. Shipments to emerging markets, such as Latin America, on the other hand, are forecast to increase by 19.5 percent.

Overall, desktop PC shipments are projected to grow by 1.9 percent this year.

The notebook market is expected to remain strong, with shipments soaring by 31.4 percent over last year, Gartner said. Mature markets are expected to see 22.1 percent more shipments, and emerging markets 38.7 percent.

Notebook shipments, however, aren't enough to reverse the market slowdown caused by decreasing sales in desktops, which make up the majority of the PC market, Gartner analyst George Shiffler said. In addition, higher notebook sales come at the expense of desktops, which people often replace with mobile computers.

"In some sense, the desktop market is being hit with a double whammy," Shiffler said.

The other whammy comes in reaching the tail end of the current replacement cycle, which can be traced back as far as 2000, Shiffler said. In addition, there are no technological advancements expected in the near term to jumpstart sales.

This year's scheduled release of Vista, the next major upgrade of Microsoft Corp.'s Windows operating system, isn't expected to cut it.

"People need to be convinced that it's a must have, and it's not clear that it is," Shiffler said.

Indeed, Vista contains a number of improvements over the current Windows XP user interface, as well as more security. But the OS is not considered revolutionary.

To combat the slowdown, vendors such as leading PC makers Dell Inc. and Hewlett-Packard Co., will have to concentrate on emerging markets, at least until the next replacement cycle, which is expected to begin either late 2008 or early 2009.

"The bread and butter of the industry are the mature markets, but because of the falloff in replacement activity, vendors are going to have to go out and look for growth elsewhere," Shiffler said. "That's the challenge for the industry."

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