PC Sales to Slow in Second Half of 2010, Gartner Report Says

After Intel and AMD reduced their forecasts for PC sales, a Gartner report warns demand for desktops and notebooks is likely to fall in the second half of 2010.

Although worldwide PC shipments are projected to total 367.8 million units in 2010, a 19.2 percent increase from 308.3 million units shipped in 2009, research firm Gartner reduced their forecast for second-half 2010 PC growth to 15.3 percent, approximately two percent below the previous forecast, in light of the uncertain economic outlook for the United States and Western Europe.

Overall, Gartner analysts said businesses will find it "very difficult" to delay PC replacements further, as the age of the professional PC installed base is already at an all-time high. Gartner research director Ranjit Atwal warned businesses that delay replacing much longer risk alienating employees, burdening themselves with more service requests and support costs, and ultimately facing higher migration costs when they eventually migrate to Windows 7

Mini-notebooks' impact on the PC market has peaked and is now waning, according to Raphael Vasquez, research analyst at Gartner. Mini-notebooks' share of mobile PC shipments declined for the second consecutive quarter in the second quarter of 2010, falling under 18 percent, according to the Gartner report. Vasquez noted mini-notebooks' share of the mobile PC market peaked in late 2009, when they accounted for nearly 20 percent of total mobile PC shipments. The report predicted their share is expected to continue falling until it reaches around 10 percent by late 2014.

"The PC market revived in the first half of 2010, but the real test of its resilience is yet to come," said Atwal. "There is no doubt that consumer, if not business PC demand has slowed relative to expectations in mature markets. Recent dramatic shifts in the PC supply chain were in no small part a reaction to fears of a sharp slowdown in mature-market demand. However, suppliers' risk-aversion is as much a factor in these shifts as any actual downshift in demand."

Vasquez said they still think the mini-notebook has a place in the mobile PC market, but not as a substitute for a standard mobile PC. Indeed, Vasquez explained the recent decline in mini-notebooks' share of the mobile PC market reflects a general realization among buyers that mini-notebooks are less-than-perfect substitutes for standard low-end laptops.

In addition, the report noted the emergence of tablets, notably Apple's iPad and the upcoming Samsung Galaxy Tab, would have an additional impact on the netbook market. Gartner defines a tablet PC as having a touchscreen size of 5 inches or more, outfitted with a full-function operating system (OS), such as Windows 7, Windows Vista, Windows XP or Mac OS X. A media tablet is defined as a device that has a screen size of 5 inches or larger and is outfitted with a restricted-function OS, such as iPhone, Android and Chrome.

"The iPad hasn't had much of an impact on mini-notebook units so far, if only because it is generally priced higher than most mini-notebooks," Gartner research director George Shiffler said. "However, we anticipate lower-priced iPad imitations will begin to take larger bites out of mini-notebook units as they are released next year."

A recent report by chipmaker Intel also lends weight to the forecast that the PC market is headed for a slowdown. Intel officials reduced their third-quarter revenue projections amid a softening in the consumer PC market. Intel executives announced Aug. 27 that they expected revenues for the quarter to come in at $11 billion, plus or minus $200 million. They had earlier estimated revenues at between $11 billion and $12 billion. Advanced Micro Devices (AMD) also reduced its forecast for demand, on the back of warnings from Deutsche Bank and Wells Fargo.