IDC Researchers Brighten Worldwide PC Outlook

Lifted by higher sales of more powerful and less expensive notebook computers, the worldwide and U.S. PC markets are delivering better results than expected, according to industry research firm IDC.

In its upcoming quarterly forecast, IDC ups its numbers two points, raising the global market growth forecast to nearly 8.5 percent and the U.S. market outlook to more than 7 percent.

IDC analyst Alan Promisel told TechNewsWorld that several quarters of modest economic growth, falling unemployment, corporate revenue and solid consumer spending all have contributed to the PC market growth.

But the biggest factor seems to be increasing sales of notebook computers, which have reached a level of performance and price that, coupled with a desire for mobility and increased wireless infrastructure, is driving growth.

Laptop Redemption

After suffering through modest losses in 2001 and only modest gains in 2002, the PC market appears to be returning to significant growth, mainly because of the popularity of notebooks, Promisel said.

"There has been increased momentum in the proportion of notebook to desktop, with notebooks getting a 26.5 percent share," he said. "That's a pretty strong trend that's likely to continue."

Promisel noted that while the "performance delta" between laptops and desktops has been virtually eliminated with more powerful mobile computers, the price points are among the most aggressive ever -- now hovering at the US$1,000 range. In addition, more manufacturers have contributed to competition, and wireless computing is becoming an important driver of PC-buying, he said.

Notebooks Dipping to $500 Mark

Yankee Group analyst Michael Kelleher agreed that performance and price are making notebook computers attractive to buyers and are expected to account for the bulk of growth in the PC market going forward.

Kelleher told TechNewsWorld that performance is likely to keep improving and price probably will keep dropping -- as long as manufacturers have a "decent margin" -- with the accent on mobility getting louder.

"I think we'll be getting to the $500 mark at some stage," he said. "When, I'm not sure."

Desktops in the Dust

Analysts agreed that despite high demand for flat-panel displays, desktop PC sales are not experiencing the same level of growth as their mobile counterparts.

"It's really not going to be a significant growth area because the usability features -- quality and performance -- even in the corporate side are probably not going to be any reason to upgrade," Kelleher said.

While Promisel said HP (NYSE: HPQ) and Dell have done extremely well by taking advantage of their volume business models, Kelleher pointed to "the old white-box market" -- basic computers put together by smaller, individual sellers -- as a source of market growth, primarily because of price.

Flat Growth

Analysts also called attention to market thirst for flat-panel displays, which boosted HP's sales amid a supply squeeze on the displays and memory, according to Promisel. He said that while PC price declines are expected to level off toward the holidays, that leveling is not likely to slow demand.

Kelleher said that despite their cost, flat panels are helping manufacturers differentiate their deals and sell PCs.

"Flat panel monitors are very sexy; there's a lot of demand for them, and many companies are using them to drive sales," Kelleher said. "The competition is just so fierce, they've got to look for any way to attract consumers' attention."

Media Center Market

While he downplayed growth in the desktop PC market, Kelleher said analysts are watching media center PCs that take computing beyond traditional applications -- such as word processing and Web access -- to allow DVD viewing and burning, media downloading and more interaction.

"Now the consumer has to deal with huge amounts of digital media and manipulate it or burn it," Kelleher said. "And for that, you need a decent computer. That is really going to be a driver, particularly in the consumer space. Right now, they're too expensive."

As Dell and Sony reportedly prepared to unveil media center PCs this week, the price of such machines was in the $1,000 range. Analysts said the additional players and increased competition in the space are likely to drive down entry-level media center PC prices as well.