IDC Predicts a Slower PC Market in 2009 Due to the Financial Crisis

In a week that saw several reports about slowing server shipments and revenues, a new report from IDC finds that the ongoing financial crisis and the trouble on Wall Street will have an impact on the PC market in 2009 and 2010. The financial crisis means that shipments of desktops and laptops will slow down, especially in the United States. Large PC vendors Hewlett-Packard and Dell warned about a challenging PC market in 2009 as consumers curtail their spending and enterprises make do with older PCs.

In a week that saw several bleak reports about server system revenue and shipments, IDC has released a new report predicting that the ongoing financial crisis will have a significant impact on the PC market in 2009 that could continue into 2010.

According to the Dec. 3 report, IDC expects worldwide PC shipments to grow only about 3.8 percent in 2009, while the revenue from sales of desktops and notebooks will drop 5.3 percent thanks to falling ASPs (average sales prices) for PCs. In 2008, PC shipments are still expected to grow by about 12 percent.

If revenues drop as IDC predicts, it will be the first time that the PC industry has seen a major impact on its revenues since 2001, when the Internet bubble burst.

In 2008, IDC is predicting that worldwide PC shipments will reach about 302 million units, while vendors will ship 313 million PCs in 2009. In the United States, PC shipments should reach 69 million units in 2008 before dropping to 67 million units in 2009, a decrease of nearly 3 percent. IDC expects U.S. PC shipments to rebound slightly in 2010 to 68.7 million units.

The result is that the worldwide PC market will not begin to recover until 2010 and it might take another two years, especially in the United States, before the market returns to the type of growth the industry has come to expect, IDC said.

"For 2009, we think that shipment volumes are going to come down and ASPs are going to come down, which means that revenue is also going to come down," said Richard Shim, an IDC analyst. "That's the big story. We are seeing a kind of a resetting of selling prices and that is going to lead to tougher times for PC manufacturers and perhaps better opportunities for consumers that still want to buy PCs."

While lower ASPs can benefit both consumers and business buyers when purchasing PCs, the financial meltdown also means that buyers have less cash to spend, especially as the United States officially enters a recession.

For enterprises, the financial crisis and the problems with the credit market mean that most companies will hold off buying new hardware such as servers and PCs and make do with the desktops and notebooks that are already in use. Shim said most large companies as well as small and midsize businesses will not refresh their PCs in 2010.

Originally, IDC had called for a refresh cycle to begin late this year and continue into 2009.

"We have been highlighting the consumer side of the industry because that has been the growth engine, but it's safe to say that if this is an impact on the consumer maker, it's also [going to] have an impact on commercial and all segments within commercial are going to negatively impacted as well," Shim said.

In November, Hewlett-Packard and Dell both issued warnings about the PC market and told analysts that falling demand for desktops and notebooks could have a serious impact on their earnings. HP CEO Mark Hurd called the 2009 PC market "challenging," while Dell CEO Michael Dell said his company would take a conservative approach in the next year.

In the coming weeks, IDC said it is expecting PC shipments to begin slowing outside the United States as the impact of the financial crisis spreads. Emerging markets in Latin America, parts of Europe and elsewhere will watch their PC shipments slip as the U.S. dollar gains strength and restrictions on credit make buying PCs harder.

In 2009, shipments of laptops and ultraportable notebooks are expected to continue to shape the market. IDC is predicting that worldwide laptop shipments will increase 15 percent in 2009, although that is a much slower growth rate than the 35 shipment increase notebooks experienced in 2008. Desktop shipments are expected to decrease 6.7 percent in 2009.