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Thursday, 15 February, 2001, 17:16 GMT
Death of the PC?

PC firms have to get used to lower growth rates
by BBC News Online's Orla Ryan

Is this the end of the line for personal computers?

As the world's largest PC companies are releasing their results one by one, analysts are looking for signs of growth in the market.

One of the market leaders, Dell has already warned that its profits will be lower than expected, largely because of the slowdown in the US economy.

But there has been some speculation that the real reason for falling profits at Dell and other computer companies is that nobody wants to buy PCs anymore.

Internet access, email, DVD, new technologies have been key drivers for consumers buying PCs

Andrew Brown, IDC
Interestingly, talk of doom and gloom has come even though there are still signs of growth in the PC market.

US investment bank Merrill Lynch has forecast that worldwide PC sales are set to grow by 12.5% this year, compared with a previous forecast of 15.4%.

By anyone's standards, a 12.5% growth rate is a sign of a healthy market.

And the traditional PC market has some high profile defenders.

Earlier this year Microsoft founder Bill Gates admitted that sales growth "has been down somewhat".

But he added: "There is not a decline in PC sales."

"It is very unusual in a market of that size to still have pretty healthy sales... The next big uptick... (will come with the) next generation of applications," he added.

The doom mongers, however, say it is disturbing that PC sales are not growing as fast as they used to.

They fear the slowdown could be one of the first signs that the market is saturated - maybe everyone who wants a PC has one and no matter how many bells and whistles the new hardware or software has, consumers still won't be persuaded to part with their cash for a new PC.

Sales slowdown

According to PC Data, fourth quarter sales last year were just under 2.5 million units - which is 18% less than during the fourth quarter of 1999.

The fourth quarter slowdown in sales could be attributed to the economic slowdown in the US, but some analysts argue that the slowdown in PC sales actually began as long ago as the beginning of last year.

Information appliances may start to crowd out PCs

PC Data's Stephen Baker
Many companies have done most of their IT spending to prepare for the millennium bug and are now choosing to put their money into something other than hardware, such as e-commerce software solutions.

On top of that, in developed countries the market is largely one of second-time buyers, says Andrew Brown, senior research analyst for personal computing at IDC, a consultancy.

The product cycle - the length of time it takes the average customer to replace their existing PC - is currently thought to stand at about three years.

The big fear is that the cycle will lengthen as consumers turn their attention to other more compact devices, such as notebooks.

There is not a decline in PC sales

Bill Gates
But IDC's Andrew Brown says consumer sales remain healthy and there is still a strong first and second hand buyer market in Europe.

"Internet access, e-mail, DVD, new technologies have all been key drivers for consumers buying PCs," he added.

However, while so far most people access the net through their computer, they will soon be able to log on to the net through their television or mobile phone.

This may inhibit PC growth in the long term.

"Increasingly, next year and going beyond, information appliances may start to crowd out PCs," says PC Data's Stephen Baker.

Changing market

And IDC's Andrew Brown admits that the nature of the market is evolving.

"PC buying isn't dead, the patterns are changing... The growth rates for consumer notebooks have been massive," he says.

And he adds that the market of supplying PCs to large businesses is a "renewal market", while small and medium sized businesses still have a "desire for hardware".

Though they too may soon join consumers in deciding that they want to buy slim notebooks, not chunky PCs.

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See also:

22 Jan 01 | Business
Dell warns on profits
08 Dec 00 | Business
Behind the profit warnings
04 Jan 01 | Business
PC sales fall in US
29 Jan 01 | Business
Gates talks up PC market
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