PC vendors face slumping revenue in 2007

PC vendors face slumping revenue in 2007

PC vendors will see revenue growth slump in 2007 because of weak demand for desktops and Vista, analysts said Tuesday.

PC vendors will focus on notebook sales and emerging markets to boost unit shipments by 10.5 percent in 2007, but revenue will lag behind with only a 4.6 percent rise, according to an analyst forecast released Tuesday.

Analysts blame the predicted shortfall on weak demand for Microsoft Corp.'s new Windows Vista OS and slowing growth in mature markets like the U.S. and Western Europe, according to a report from Gartner Inc. Those factors will cause average selling prices to fall, and put rising pressure on PC vendors to improve their operations or else exit the market, Gartner said.

The researchers forecast that global PC shipments will reach 255.7 million units in 2007, generating US$213.7 billion in revenue.

These trends have already begun to depress the PC industry, causing a rise of just 7.3 percent to 64.7 million units for the fourth quarter of 2006, far lower than the 15 percent increases recorded for the same quarter in 2005 and 2004, according to a similar report also released Tuesday from IDC.

More specifically, the demand for desktop PCs continues to plummet, IDC said. By 2011, notebook sales will account for more than 50 percent of the global PC market. Desktop sales now are strong only in emerging markets, with more than 50 percent of 2006 desktop PC shipments going to buyers in Asia/Pacific (excluding Japan), Latin America, Canada, central and eastern Europe, the middle east and Africa.

Some vendors had predicted a spike in sales related to Microsoft's long-delayed release of Vista in January. But that pattern never materialized, with practically no enterprise buyers and only a small number of consumers and small and medium-size businesses (SMBs) rushing out to make delayed PC purchases, Gartner said.

"While Vista includes a number of interesting features, these features just don't have enough 'must-have' appeal with the average home and SMB user to spark a significant rush of new PC sales," said Mikako Kitagawa, a principal analyst at Gartner.

Instead, the majority of consumers and SMBs will adopt Vista gradually, buying it by default as they replace existing machines in coming years. And virtually no large businesses will adopt Vista in 2007, since enterprise IT managers have to test the new OS against existing software applications before rolling it out, he said.

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