Global PC Shipment Growth Wont Bring Rising Revenue

Researchers predict that more PCs will be shipped during the next few years, but without a corresponding revenue gain, putting more pressure on already weary manufacturers.

Worldwide PC shipments are expected to exceed previous projections over the next two years, rising on the wings of higher notebook shipments, falling average prices and strength in emerging markets, according to new forecasts.

However, analysts say, even though unit shipments will grow, revenue increases will not keep up, leading to tough conditions for PC makers.

Market researcher IDC (International Data Corp.) on Thursday bumped up its projections for PC shipments in 2005 and 2006.

The Framingham, Mass., firm expects worldwide PC shipments to reach 199 million in 2005, an increase of 11.4 percent from 2004, and to eclipse the 200 million mark in 2006. During 2006, IDC predicts, shipments will rise by 9 percent to 217 million.

Gartner Inc. also recently upped its 2005 PC market forecast. Gartner expects PC makers to ship 203 million units, an increase of 10.5 percent from 2004.

The Stamford, Conn., company also upped its 2006 PC market forecast to 219 million units, an increase of almost 7 percent. Gartner forecasts growth rates of about 7 percent and 8 percent, respectively, for 2007 and 2008.

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Both firms agree that notebook shipments will boom in the next few years. Gartner expects worldwide notebook shipments to jump almost 24 percent in 2005, to 58 million units, and 17.5 percent in 2006, to almost 69 million units, said George Shiffler, an analyst at the company.

But growth will eventually slow.

"For several quarters now the market has responded to aggressive pricing and marketing, creating opportunities for growth and maintaining market momentum. Overall growth is likely to fall to single digits, but we continue to expect steady gains throughout the forecast period in all regions," Loren Loverde, director of IDCs Worldwide Quarterly PC Tracker, said in a statement.

Eventually, the smaller growth numbers wont be able to offset falling prices and the PC markets total revenue will flatline, Gartner forecasts.

"Whats going to hurt is that, because of price declines, revenues are going to be basically flat," Shiffler said. "Were not looking for much revenue growth at all. Notebooks help—they have higher average selling prices—but theyre coming down [in price] too."

Worldwide PC revenue in 2005 will total $203.5 billion, Gartner predicts, and will rise to $204 billion in 2006, before declining back to $203 billion in 2009.

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"Thats going to put the squeeze on," Shiffler said. "Eventually people will be forced out of the market, and that will ease the competition."

Over the past few years consolidation has been rampant. Hewlett-Packard Co. purchased Compaq Computer Corp. in 2000, and Gateway Inc. and eMachines Inc. tied the knot in 2004. This year, IBM sold its PC arm to Lenovo Group Ltd. Only Dell Inc., the worlds largest PC maker, has remained relatively unscathed.

Despite the ominous clouds gathering, several markets are still expected to show double-digit growth rates, boosting overall shipment increases.

Much of the growth will come from central and Eastern Europe, the Middle East, Africa and Latin America, where IDC predicts that shipments will grow by 20 percent or more. Areas including the Asia/Pacific region and Western Europe will show increases in the mid-to-low teens, IDC said.

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