Enterprises to Cut PC Purchases as Prices Increase: Gartner

PC vendors will grow prices by 10 percent to compensate for profits lost to the strong dollar, and some businesses and consumers will delay purchases.

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A worldwide PC market that already is under pressure will see vendors increase the prices of their systems this year by as much as 10 percent to offset the impact of a strong dollar on profits, and businesses will respond by holding on to their older systems, according to Gartner analysts.

In a report April 29, Gartner said prices in such mature markets as Western Europe and Japan, where the strong dollar is particularly impinging on corporate profits, will see sharp increases.

"Device vendors will mitigate the impact of their declining 'dollarized' profits by taking advantage of single-digit-percentage decreases in PC component costs during 2015, and by selling PCs with fewer features to keep prices down," Ranjit Atwal, research director at Gartner, said in a statement. "However, vendors' margins will fall, even as they shift their shipment focus to the regions least affected by these currency effects."

The result will be larger enterprises and some consumers putting off buying new PCs due to the higher prices, while smaller businesses and other consumers will buy less-expensive systems with fewer features. Larger companies will reduce their PC purchases by as much as 20 percent, according to Atwal.

"Large organizations will look to lengthen their PC lifetimes by six months (10 percent) in comparison with 2014, rather than buying less expensive models or removing requirements for key features," he wrote. "In addition, purchases of optical drives and optional accessories will disappear."

This is the latest bad news to hit a PC market that continues to struggle. Global PC sales declined sharply between 2011 and 2013 as the popularity of tablets and smartphones continued to grow. The sales declines slowed last year, driven in large part to Microsoft's decision to end support for the Windows XP operating system, which forced businesses to refresh their systems. In addition, vendors were bringing new form factors to the market and prices were going down.

However, the industry's woes continued this year, with both Gartner and IDC analysts earlier this month noting a further slide in first-quarter PC shipments worldwide (by as much as 6.7 percent, according to IDC) as the Windows XP refresh trend slowed and buyers began waiting for Microsoft's upcoming launch of Windows 10.

PC and component makers, like Hewlett-Packard, Intel and Advanced Micro Devices, are feeling the impact of the shipment slowdown on their financial numbers. Price increases won't help. Enterprises will shift IT dollars away from PCs and toward other segments, such as software and services, according to Gartner.

As for consumers, 30 percent of PC buyers will purchase less-expensive PCs ($500 or less), while another 40 percent who normally buy systems priced between $500 and $800 will delay their purchases due to the price increases. Those buyers who look for systems priced above $800—which represent the other 30 percent of the consumer market—will extend the lifetimes of their systems by 10 percent to compensate for the higher prices, while absorbing the remaining price increases, the analysts said.