Hardware & Infrastructure
News
11/29/2004
02:09 PM
Connect Directly
RSS
E-Mail
50%
50%

Gartner: Third Of Top PC Vendors Gone In Three Years

Three of the top 10 PC vendors will be pushed out of the business by 2007, research firm Gartner predicted Monday.

Three of the top 10 PC vendors will be pushed out of the business by 2007, research firm Gartner predicted Monday.

The most likely victims? Hewlett-Packard and IBM, said Leslie Fiering, Gartner's research vice president for its client platforms group.

Of the top PC sellers, only Dell has consistently shown profits the past several years, Fiering said, citing the PC divisions of HP and IBM as being vulnerable to spin-off if their overall drag on profitability gets to be unsustainable by the parent corporations.

"Exiting the market may be the only logical choice for vendors bleeding profits and struggling for share," said Fiering in a statement accompanying her prognostication.

According to Gartner, the top 10 ranked by units shipped are Dell, HP, IBM, Fujitsu, Fujitsu Siemens, Toshiba, NEC, Apple, Lenovo Group, and Gateway. Lenovo, China's largest PC maker, is headquartered in Beijing and is the only vendor in the top 10 not from either the United States or Japan.

Although PC vendors have seen a resurgence in sales of late--with double-digit growth returning to a business that took it on the chin during the global recession--tougher times lie ahead, said Fiering.

"Global vendors will be forced to continue maximizing supply-chain efficiencies and, finally, abandon any efforts to differentiate other than on price and service," she predicted. "Vendors that have yet to do so may attempt to diversify into related market pursuits, such as consumer electronics, to bolster margins. Others may attempt mergers with rivals to improve margins through economies of scale."

Dell and Apple, for instance, have aggressively taken the first route by expanding into consumer electronics, such as LCD TVs (Dell) and portable music players (Apple). Gateway, meanwhile, staved off disappearance by merging with eMachines in January, 2004.

The basic problem, said Fiering, is that PC sales will slow after next year.

Gartner's projections for unit-growth increases from 2006 through 2008, for example, are about half that of the average increases expected from 2003 through 2005. During the '06-'08 run, the Stamford, Conn.-based research firm expects PC shipments to increase only 5.7 percent annually, a dramatic fall-off from '03-'05's average of 11.7 percent.

It's this anticipated sales deceleration that will drive some vendors from the market.

"With PC replacements still in full swing, 2005 should be a reasonably strong year for vendors," said Fiering. "However, the end of the replacement cycle is likely to strain even the largest PC vendors in 2006 and beyond."

To add to the problem for U.S.-based vendors, a greater chunk of sales will end up in emerging markets, where PCs currently sport a smaller penetration percentage. Regions such as India, Russia, and, particularly, China will be increasingly important to sales growth, said Fiering.

That leaves local vendors such as Lenovo in the catbird seat. Fiering said that Lenovo could easily leverage its strong standing in China and its low-cost operations into becoming a global player.

"Local PC vendors in emerging markets should consider acquiring local rivals as a means to consolidate home-market position and develop the scale economies required to springboard into a global presence," Fiering recommended.

On the customer side, she said that buyers should take advantage of the future slowing sales trend to pressure vendors on price. "However, customers also must consider the vendor's commitment to the PC market, as well as the vendor's 'staying power,'" she wrote.

Comment  | 
Print  | 
More Insights
The Business of Going Digital
The Business of Going Digital
Digital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Tech Digest September 18, 2014
Enterprise social network success starts and ends with integration. Here's how to finally make collaboration click.
Flash Poll
Video
Slideshows
Twitter Feed
InformationWeek Radio
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.