PC market sends out mixed messages

Consumers are easing off on PC purchases as corporations ramp up theirs, according to market researcher IDC.

Consumers are easing off on PC purchases as corporations ramp up theirs, according to market researcher IDC.

Although slackening consumer demand will lower market expectations in the second half of 2004 and into 2005, IDC believes total sales growth for 2004 will outstrip expectations, with shipments rising by 14.2% to 176.5 million units.

"We think there is good news for the second half of the year, but we don't expect that to spill over into future periods," said IDC's Loren Loverde.

One of the best quarters for commercial PC sales in five years is responsible for this year's raised expectations. PC shipments to business customers grew by 17.2% in the second quarter compared with last year, the best growth rate in the category since the middle of 1999.

Consumers kept the PC market afloat in 2002 and 2003 as corporations held off on replacing PCs amid concern over the millennium bug. Over the last few quarters those corporations have finally decided to replace their aging PCs. But with individuals lacking a compelling reason to upgrade recently purchased systems, consumer demand is set to decline.

IDC expects worldwide consumer growth to plunge from almost 20% in the second half of 2003 to 9% in the second half of 2004. In 2005, the worldwide consumer segment is expected to grow 8.7% for the full year.

Gartner also expects PC sales growth to shrink over the next year or so. The research company has reduced its expectations for 2004, saying that PC suppliers and chip makers had seen only normal seasonal growth  in the second half of the year rather than the expected stronger-than-average growth.

Intel lowered its third-quarter earnings expectations earlier this month and blamed a weaker worldwide market for the shortfall.

IDC predicts that PC market growth will shrink with the industry unable to sustain the double-digit growth rates it enjoyed after the recession in late 2001 and early 2002.

"The message is not that there's no more consumer growth. It's that consumer growth has already passed through a peak recovery cycle," Loverde said. He added that the continued growth in portable PCs would help keep consumer demand from completely falling off.

Although the PC market outside the US is stronger, the US still accounts for the largest portion of the PC market, dragging down the future expectations. Loverde said that growth in Europe would remain strong in 2004 but that much of the future growth in the PC market would come from outside the US and Western Europe.

Tom Krazit writes for IDG News Service

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