San Diego (CA) – The run for the year’s busiest buying season has begun, as PC vendors are beginning to roll out their products for the Christmas season. Time to look at this year’s trends: We chatted with Current Analysis West’s Toni Duboise about what you can expect from the retail PC offering in the coming weeks.

If you are among those who are planning to buy a new off-the-shelf computer system within the next two months, you probably already have begun looking a bit closer at those weekend ads to get an idea what your dollars will buy this year. Contrary to 2006, where Microsoft artificially inflated demand through its Vista coupons (that allowed users to buy Vista pretty much three months ahead of its January 30 release), there aren’t any significant driving factors that could convince you to purchase a new PC other than to replace an outdated or broken system.

But, of course, on a closer look, there are interesting market trends this year as well. Toni Duboise, senior analyst for Current Analysis West, covers the U.S. computer retail segment and gave us some insight on what we can expect this year.


Notebooks to dominate the market

Believe it or not, the notebook is already outselling the good old desktop computer by far. In Q4 2006, notebooks accounted for 64% of unit sales (desktops 36%); year over year, notebook retail shipments increased by 51% over 2005 while desktop shipments declined by 2%. The overall shipment growth for the industry was 26% in Q4 2006.

Duboise expects a similar number for this year’s Q4 and expects that seven out of ten sold computers will be notebooks. The number will retreat slightly from Q3’s 74% notebook share, as back-to-school sales “over-pronounce the notebook market,” she said.  According to the analyst, the price of the average retail notebook is currently just $150 above the price of the average retail desktop - $583 in Q3 2007 – which apparently creates a compelling reason for many consumers to make the jump to the notebook.

Duboise noted that average selling prices (ASPs) for notebooks have been in a “freefall” for some time and there is little reason to believe that this trend will stop before the Christmas season.


Desktop PC prices likely to increase

The growing popularity of notebooks creates an interesting scenario for notebook computers. On the one hand, desktop PCs need to offer substantial value over a notebook computer to remain attractive for buyers; on the other hand Duboise said that there is reason to believe that ASPs will actually increase slightly above the $551 recorded for Q4 2006.

“Good deals” are still selling PCs during the Christmas season, according to the analyst, and therefore the ASP of desktops is expected to be lower than the $583 in Q3; but consumers are asking for faster processors, more memory and higher capacity hard drives in desktop PCs which ultimately will increase the average price year-over-year. So, while of course you will be getting more features and more performance than last year, expect to be spending more money on an average PC than in 2006.

Adding to that trend is the march of discrete graphics capability into the desktop segment. For the first time, discrete graphics cards will be available in sub-$800 PCs, while consumers had to spend $1200 for retail computers with stand-alone graphics cards in previous years.


Intel vs. AMD: The end of the price war?

Consumers have been spoiled by a cut-throat price-war between Intel and AMD, in which Intel has relentlessly going after lost market shares in virtual all segments of the processor market, while AMD tried to hold on to as many shares as possible. But there are signs that prices have settled at least for now and that further dramatic price drops are rather unlikely.

Duboise told us that Intel “for whatever reason has let off the gas” and isn’t quite as aggressive anymore as in previous quarters. While the company was especially leveraging its Pentium D series earlier this year to put pressure on AMD on the lower end of the market, Duboise feels that the company may have reversed its strategy and now focuses on higher margin products. “This is where their marketing dollars are going,” she said. Look for AMD Athlon X2 processors in the entry-level and mainstream segment of the market and for Core 2 Duos from the mainstream and up.   

There is very little visibility on the potential impact of Intel’s 45 nm Penryn processors and AMD’s Phenom CPUs. If history will repeat itself, these new processors will be available in rather limited quantities and first make their way into high-end systems that aren’t that interesting for retail consumers. We expect both processors to be more a Q1 2008 than a Q4 2007 story.   


Dual- or Quad-core?

If you have been looking through your local electronics retailer, then you may have seen more PCs with Q6600 quad-core processors for less than $1000. The question obviously is whether it is the right time to purchase such a system. As so often, the answer depends on how much money you are willing to spend.

If it’s the best deal you are after, then a quad-core is probably not for you. According to Duboise, HP’s and Gateway’s Q6600 systems will cost slightly above $1100 with a monitor, while a dual-core system with the same hard drive, memory and graphics card may be selling for $700 or less. If you don’t run applications that take advantage of those four cores, the premium for two additional cores may not make sense and the investment in more memory, a better graphics card and more hard drive space may be worth a consideration.

Duboise noted that quad-cores will not play a big role in this Christmas season, as these systems haven’t reached a critical price point of $800 yet. While she believes that consumers understand the value of four cores over two, the price tag of these PCs may be too high to be convincing. The analyst also said that it “probably is not a wise choice for CPU manufacturers to keep the current price erosion going” and keep quad-core processors positioned on the higher end of the spectrum.  

me too!!

Oct 15, 2007 22:36     

For the first time in 26 years i am going to purchase a laptop, and i dont see a reason not to, it seems my money is getting about the same thing, so id rather have portability and low power usage rather than slightly more speed and a slightly bigger monitor(and mabie a smidge more memory...). seems to me that its just a better deal for me.
mike report abuse vote down vote up Votes: +0

7 years since last desktop

Oct 16, 2007 00:51     

Last time I built a desktop for my personal use was back in 2000. Since then I never purchased/built a desktop for my own use. Simply sticked with laptops. Laptop somewhat reached the sweet spot where I could upgrade certain parts (ram, hdd), what can't with a USB gadget. Also its portability, low power consumption are quite a catch. Only downside is... its quite hard to match the number crunching performance of a desktop comp (obviously they have less FPU units in CPU).

Alien report abuse vote down vote up Votes: +0

smaller with lower prices

Oct 16, 2007 07:16     

With the OLPC going on sale Nov 12 and the Asus EEE PC coming out, there are low priced notebook computers that one can buy. The OLPC - buy one for oneself and one for a third world country - is about $400. The Asus EEE PC is about $200. Intel is suppose to have a low priced concept notebook computer.
TomLeeM/BigWarpGuy report abuse vote down vote up Votes: +0

Laptops will always be second choice for me.

Oct 16, 2007 10:00     

I last year brought my first laptop which was made by HP and had a 64bit AMD processor and all the latest bells and whistles since I upgraded it to the max. I already had an older custom built desktop that I had upgraded to the max when I brought it. Most of the time I used the desktop and took the laptop with me when needed. Of course my place got burglarized a about 3 months ago and needless to say my HP laptop (along with my work laptop) were both stolen. They of course left my big gigantic desktop alone though so I at least have that. Needless to say this made me realize I'll probably always keep a desktop around as my main computer and have a laptop solely as a luxury to take with me when I want to have a cpu nearby. Besides I find laptops are limited in your ability to upgrade them, they don't have a lot of expansion slots, the disk drives are usually costlier, but not slower than those in desktops, and you have to buy a lot of accessories such as docking stations, external usb hubs, and etc. just get the same level of what you can do with a desktop. By the time one finishes buying all that stuff you might as well have brought a desktop to have in addition to the laptop. Of course I have very much a power user so the average "Joe" or "Jane" might not need such extras. Just my 2 cents.

Rodney report abuse vote down vote up Votes: +0

Above comment

Oct 16, 2007 12:01     

In responce to the above comment, thanks for wasting about 1 min of my life. What a waste of time piece of crap comment, saying nothing of any use or interest. PS. Desktops rule over power only cos its cheaper to buy or make a powerful desktop. More pro's of a laptop, than a desktop. Laptop everytime, but i got both, so people should stop being tight.
Jon report abuse vote down vote up Votes: +0

$400 for quadcore?

Oct 16, 2007 14:13     

Perhaps I'm the only one confused, but one can purchase a quadcore processor (q6600) from newegg for under $300, so there's no reason for a $400 increase unless there is a change in motherboard (which should not be necessary) or strange pricing.
Joshua report abuse vote down vote up Votes: +0

re:joshua

Oct 20, 2007 02:34     

its not strange at all. They sell a hell of a lot more sub $800 computers than they do $1100 computers. Volume changes the prices. You are also going to find that OEMS are typically going to be using the most minimalist (ergo cheapest) chipset that will support the CPU, nine times out of ten. So yeah, very likely different MB.
re: Andrew report abuse vote down vote up Votes: +0

Desktops

Oct 25, 2007 09:16     

I wonder if there's any way they can track custom built machines, for those of us desktop gamers. Chances are gamers are not likely to buy a prebuilt desktop and would either go to a place that builds custom machines, or they'll buy the parts and build it themselves. I know for the average user they would rather have a laptop for the convenience and the best part of all, space savings, also the portability is a huge factor if you're on the go a lot. But laptops are in no way ever designed to be a juggernaut when it comes to power computing. I like them for that reason. Then there's also the corporate market. Most corps still uses desktops, and I wonder if corporate sales are also accounted in that equation or not. Statistics, ahh, gotta love the fact you can spin them in so many different ways.

Devon M report abuse vote down vote up Votes: +0