System builders to ship more PCs, earn less money in 2006

Posted by Wolfgang Gruener

Stamford (CN) - Gartner today followed yesterday's Q2 PC sales report published by IDC and agreed that worldwide PC shipments are on track for a double-digit increase over 2005. However, the erosion of average PC prices will impact the bottom line: Revenues will decline 2.5% over 2005, Gartner estimates.

The PC industry appears to be in much better shape than many analysts had predicted earlier this year. Even as PC replacement sales are fading, the decrease in average PC pricing is expected to fuel near-term computer sales, at least until saturation becomes an issue in mature markets. The release of Windows Vista early next year is expected to bring some extra incentives for consumers to buy that new PC, but, on a more negative note, Gartner's analysts cautioned that "we remain skeptical of Vista's impact."

Gartner estimates that global PC shipments will reach 233.7 million units this year 10.5% more than in 2005. However, revenues are expected to come in at $198.3 billion, down about 2.5% from 2005.

As IDC, Gartner also believes that emerging markets will become an even more serious growth factor in the worldwide PC industry. "Steeper price declines will also drive faster growth in emerging markets," said Mikako Kitagawa, principal analyst for Gartner Dataquest's Client Platforms research program. "Growth should be more sustainable in these markets due to low penetration, expanding economies, and a growing number of PC ownership initiatives. Emerging markets are expected to post solid double-digit growth during the next two years."

Compared to the very positive outlook from IDC for the remainder of the year, Gartner is conservative with its forecast. "PCs will have a difficult time competing for consumer wallet share this holiday season," the firm wrote in a press release. "Excess production capacity has lowered LCD panel prices, and that has dropped the prices of LCD TVs. The prices of many other consumer 'life-style' electronics are falling as well, putting them in direct price competition with PCs."

"The battle between PCs and LCD TVs in particular is likely to be especially intense over the holiday season given that LCD TVs will almost certainly be backed by aggressive holiday marketing and even lower prices," said George Shiffler, research director for Gartner Dataquest's Client Platforms research program. "Even the latest multifunction mobile phones could pose a threat with some buyers considering the prices of these phones and accompanying service contract is increasingly on par with low-end PCs. Vista's absence will definitely make it harder for PC vendors to maintain consumer interest in PCs without cutting prices."