Buying Power

By Scott Ferguson  |  Posted 2006-12-19 Print this article Print

While the revenue change has much to do with the higher margins and the larger price tags that notebooks carry, Fiering said notebook growth has a lot do with the buying power of the middle class in mature markets like North America, Europe and Australia. By the end of 2007, Fiering predicts that notebook will start to out-ship desktops in these markets. The rest of the world will continue to buy more desktops, and notebooks will not start to outgrow desktops until at least 2010.
"Notebooks have hit a threshold," Fiering said. "People feel they can afford them and people will continue to buy them over time."
The fact that notebook revenue is poised to overtake desktop revenue can also be seen in several recent financial quarterly reports. When HP, of Palo Alto, Calif., announced its fourth-quarter results, the revenue from desktop sales remained flat, while its notebook revenue soared by 24 percent. Its the same story at Dell. The Round Rock, Texas, PC makers third-quarter fiscal numbers showed the company earned $3.9 billion in revenue from the sale of notebooks—a 17 percent increase. Meanwhile, its overall revenue for desktops was higher—$4.7 billion—but the number represented a 5 percent drop compared to the same time last year. The reasons for the popularity of notebooks and the decline of desktops vary, according to analysts. Part of the notebook surge is driven by the consumer market, as more and more users seek mobility in their PCs, Shim said. HP has done a good job of focusing in on this market, while Dell—once the leader in consumer PC sales—shifted its model too far toward businesses and lost some momentum in the notebook market, he said. Click here to read more about how HP beat out Dell for the top PC maker spot. Charles King, an analyst at Pund-IT Research, in Hayward, Calif., sees a similar pattern. "I agree that there has been a real shift toward mobile computing and that shift really started in 2002," King said. "You have had a broadening of wireless Internet hotspots and that there has also been a group of professionals who have really turned to mobile computing. If the 1990s were the decade of the cell phone, then I think we are now in the decade of the notebook. In public spaces, from airports to hockey rinks, you see people typing away." Additionally, the ability for notebooks to deliver the type of power and performance—especially with the help of a line of notebook processors from Intel and Advanced Micro Devices—have helped close the gap with desktops. Even with this fundamental shift, Shim, King and other analysts still see significant space for desktops, especially within the enterprise. Although part of the workforce has gone mobile, King said traditional brick-and-mortar companies still have a large segment of the workforce that puts in a 40-hour week at their desk but do not need to take work home or travel for business. King also believes that when IT administrators are shopping for new PCs, they are not replacing desktops with notebook, but buying a combination of the two as the budget sees fit. Part of buying trend in the enterprise is also driven by the channel. Fiering said VARs have turned their clients onto notebooks because their average sale price means better margins. Plus, since the average notebook lasts about three years compared to four years for a desktop, VARs can offer maintenance services to users. Then there is the question of how Microsofts Vista will affect the market. The feeling among analysts has been mixed as to whether the new OS will lead to a refreshment of hardware across the enterprise space. Most businesses do not expect to adopt the business version of Vista, which was released Nov. 30, anytime soon, according to analysts. The consumer version of Vista is scheduled for release Jan. 30, 2007. For Shim, the notebook business, with its base in the consumer space, is subject to the whims of the market. A new design trend or a change in the average sale price could shift the market again. "What happens when notebooks hit 50 percent?" Shim asked. "Are they going to keep going until they hit 100 percent? I dont think so. Desktops will always have a space in the market, and they will continue to be the majority in the commercial market." Check out eWEEK.coms for the latest news in desktop and notebook computing.


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