Analysts Predict PC Shipments Will Grow, Revenues Flatten

Dropping PC prices are causing both increased sales and decreased revenue, according to the Garter Group.

Worldwide PC unit shipments are likely to keep growing until the end of the year, but revenue in the sector is proving to be much more sluggish and will probably be flat by years end, according to a preliminary forecast by the research firm Gartner Group.

In a report tracking PC trends, analysts projected that worldwide unit shipments would total 206.6 million in 2005, which represents 12.7 percent growth compared to the same quarter last year.

The momentum is expected to slow somewhat in 2006, with unit shipments set for just 10.5 percent growth.

Despite more units being sold, revenue from those shipments is expected to fall, the research firm noted. In 2005, Gartner Inc. predicts that revenues will drop 0.5 percent, and slip 0.4 percent in 2006.

/zimages/3/28571.gifRead more here about why analysts predict that rising global PC shipments wont mean revenue increases.

The disparity in growth rates is attributable to continuing declines in the ASP (average selling price) of PCs, said George Shiffler, principal analyst for Gartners Client Platforms research.

"The pricing really is the big story here," he said. "Pricing cuts have driven a lot of this shipment growth, and we were actually surprised by how much the growth exceeded expectations."

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In addition to price chopping by PC vendors, those companies are also focusing more intently on offering lower-end machines, Shiffler added. The result is a pricing environment that has sparked more PC replacement in corporate environments, but it could come at the cost of future revenues.

"The ASP cuts have encouraged people to replace equipment earlier than they would have otherwise," said Shiffler. "But, in some ways, that means were borrowing from the future to achieve the growth we have now."

Drops in mobile PC prices have been particularly remarkable, said Mikako Kitagawa, principal analyst for Gartners Client Platforms research.

"PC vendors have succeeded in increasing the unit share of higher-margin mobile PCs, but this has resulted in a significant sacrifice of desk-based revenue as vendors struggle to maintain the value proposition of desktops at the low end of the market," Kitagawa said in a news release.

Mobile PC sales are expected to keep going strong, but eventually the sector could be hurt as desktop sales falter. "Vendors are going to find out how elastic demand and pricing can be in the next two quarters," Shiffler said.

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