Handicapping the PC Vendors

Of the top 10 PC manufacturers, which three will be gone in 2007? Gartner says tougher times lay ahead for PC vendors and that three of the top players are likely to be squeezed out of business by lower profits and slumping sales. But Gartner wont say which three will be gone.

An Associated Press story quotes Leslie Fiering, Gartner research VP, as making the prediction. Ive spoken with her occasionally over the years and always considered her to be one of the brighter lights of the research biz. If she says bad news is ahead, Id tend to believe her. It would be nice, however, if shed been a tad more specific.

Gutless predictions like this are a no-lose for Gartner. When all 10 companies are still here in 2008, if someone mentions the 2004 prediction Gartner can claim to have sounded the alarm early enough to avert the catastrophe. And by not naming the three, Gartner still gets to sell research to all 10.

/zimages/6/28571.gifClick hereto read more about the leaders in PC sales.

So, today Im going to do what Gartner wasnt willing to: predict which companies are in for the toughest time over the next few years. Remember, however, that Gartner predicts the shakeout wont start until 2006 and that 2005 will actually be a good year for the companies.

Having three big companies crater within the 24 months between Jan. 1, 2006, and Dec. 31, 2007, seems like a steep attrition rate, so I am going to stop short of Gartners “doom” prediction by making only a “gloom” prediction myself. Still, if Im right, being able to predict gloom for specific companies this far in advance is a pretty neat trick.

The top 10 worldwide vendors, by units shipped, are Dell, HP, IBM, Fujitsu Ltd., Fujitsu Siemens Computers, Toshiba, NEC, Apple, Lenovo Group and Gateway.

Of the bunch, Dell is clearly the most successful, making it the least likely to bail on personal computer sales. In the AP story, Fiering says Lenovo, a domestic Chinese manufacturer, is well-positioned. On that basis, I will also pull them out of the death watch.

/zimages/6/28571.gifFor more insights from David Coursey, check out his Weblog.

IBM and HP are mentioned as potential pull-out candidates because lower PC margins put a strain on corporate profitability. The likelihood of both IBM and HP leaving the PC market almost at once is nil.

If either IBM or HP wants out, theyd either sell the PC business (to the other?) or spin it to shareholders as a new company. In this way, the parent could get out of PCs, but leave behind a large enough company to stay put in overall market share. That makes leaving the PC business much less painful for either of these two.

IBM seems the more likely of the two to follow this course. It would be hard to explain the Compaq acquisition if HP gets out of PCs so soon.

Next Page: Who is the most troubled?

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Of the 10, Gateway is the most obviously troubled, though its reverse acquisition of eMachines might be the solution the company has been looking for. Well know more once we see how holiday sales add up. Gateway could go totally belly-up more easily than any of the other nine.

Apple doesnt seem likely to get out of its flagship PC business, although by the time 2007 arrives we may be referring to the iPod as Apples flagship.

That leaves two companies named Fujitsu, as well as NEC and Toshiba. Of the four, NEC could leave the PC business without being missed. Toshiba still has a business and seems likely to stay put. Fujitsu Siemens is the top European PC company, while Fujitsu Ltd. is the big Japanese company, best known in the United States for its Tablet PC models.

/zimages/6/28571.gifClick hereto read how PC sales are feeding Microsofts revenue stream.

As Tablet PCs go mainstream, Fujitsu Ltd. may be unable to remain in a market that it helped pioneer. Its hard to imagine Europe saying bye-bye to Siemens, though the Germans taking on a Japanese partner, well, I guess it has happened before.

Taking all this into account, but without detailed financial or sales number crunching, heres the order in which I handicap these companies, from most likely to be around as a PC company on Jan. 1, 2008, to least likely.

1. Dell
2. Lenovo Group
3. Apple
4. HP
5. Toshiba
6 Fujitsu Siemens
7. IBM
8. Gateway
9. Fujitsu Ltd.
10. NEC

If Gartner is right, that means Gateway, Fujitsu Ltd. and NEC are goners. But if either IBM or HP spins out its PC business, then things look better for one of the three.

My hope is that all these companies will “make it” and be around in 2008. Thats not impossible, but I agree with Gartner that its unlikely. As to which companies may leave the PC business, you have my educated guess, but its not offered with much feeling. I think its more likely all will survive than three will leave. At least, thats how Id like to see things turn out.

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