September 15, 2006 12:47 PM PDT

Analysts: PC sales to hold ground on price cuts

Three months of steep price cuts will take a toll on PC revenue this year, but shipment growth should hold steady amid holiday competition from flat-panel TVs, analysts said this week.

IDC and Gartner both released updated forecasts for the 2006 PC market that hold growth expectations steady at around 10 percent for the year. PC shipment growth is being held up by price cuts this year, as the market becomes much more sensitive to price rather than features or capabilities, said George Shiffler, an analyst at Gartner.

Intel and AMD have significantly cut prices this year: Intel is looking to clear out inventory of older processors ahead of its new Core 2 Duo chip, and AMD is trying to stay in sync. These prices cuts did stimulate more buying than previously thought in the second quarter, among small businesses in particular, but the market is at the tail end of a three-year replacement cycle, Shiffler said.

The good news is that the market isn't tanking the way some had feared, said Bob O'Donnell, an analyst at IDC. Notebooks continue to be the driving force behind PC shipments, and growth in that category is still strong. And while growth in developed economies like the U.S. and Western Europe is slowing, PC growth is still strong in emerging economies, he said.

One factor that will bear watching in the fourth quarter is the aggressiveness of consumer electronics vendors, both analysts said. Flat-panel TVs are expected to be a hot seller this holiday season, and there's a chance that since there's little in the way of new features this fourth quarter to spur buying, consumer might opt for a TV over a new PC, Shiffler said. Microsoft had originally hoped to have Windows Vista out this year, but the latest delay has pushed that back into 2007.

But even though people aren't necessarily replacing their older PCs, mainstream users are starting to add second or even third PCs to their homes, in much the same way that they've added multiple TVs, O'Donnell said. There's still plenty of room for PC shipment growth among these types of buyers, especially for notebooks, he said.

Gartner estimates that PC shipments will grow 10.5 percent this year to 233.7 million units, but PC revenue will decline 2.5 percent. IDC also believes shipments will rise 10.5 percent, but pegs the expected total at 229.7 million units. Consumer growth will outpace commercial growth, and growth will be stronger outside the U.S. than inside, both analysts agreed.

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price cut, Gartner Inc., shipment, flat panel, AMD

 

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