Glory Days For PC Vendors Will End In 2000, Study Says



Corporate PC spending will peak in 1999, then sharply decline after the year 2000, according to a report released today by Forrester Research.

According to the report, which is based on spending plans collected from 50 Fortune 1,000 companies, corporate spending on PCs is expected to hit a high of $55.4 billion in 1999, up from 1998's $53.5 billion. The increases come as companies look to replace outdated desktop hardware that may not be year 2000-compliant. Spending is expected to plateau late in 1999, then drop to $47 billion in the year 2000 once companies have completed the upgrades.

Two-thirds of the companies surveyed indicated they'll spend money developing applications that support PCs with browsers, rather than upgrading PCs. Businesses will increasingly focus on less-expensive Internet-based equipment, such as PalmPilots and "simple screen" machines that don't have full-fledged functionality but are tailored to perform specific tasks.

Carl Howe, Forrester's director of computing strategies services, believes the changes in the PC market will result in increased competition, price slashing, and consolidation. "Our view is that the top five [vendors] will get more share by taking it away from second- and third-tier vendors," Howe says. "But when you're trying to steal market share, the weapon is price, so even if you're winning, you're shipping more units but not gaining revenue."

Howe predicts that in such a market, services will be a much stronger selling tool. "That's good news for folks like Compaq: Their acquisition of Digital will pay back in spades. But folks like Dell who look outside for services won't fare so well," he says.

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