PC Shipments Higher Than Expected

IDC says lower prices and strong consumer demand will spur an increase of more than 15% in the fourth quarter.

Worldwide PC shipments are expected to increase by 15.3% in the fourth quarter, driven by lower prices and strong demand among consumers, market research firm IDC said Thursday.

Because of the higher-than-expected growth in the fourth quarter, IDC raised its estimates for PC shipments for the year to more than 152 million, an increase of 11.4% over last year. Earlier growth projections were 8.4%.

Despite the increase, lower prices are expected to hold 2003 revenues down to the same level as last year--just over $175 billion, IDC said. For comparison, shipments this year are expected to be 8.8% ahead of 2000, the previous highest year for PC shipments, while revenue forecasts are 22% lower.

Shipment growth next year is expected to continue at 11.4%, up from prior expectations of 10.2%. But revenue is forecast to increase by only 4%.

The lagging revenue figures means computer makers unable to reduce costs will experience lower profits. But for businesses and consumers, the trend reflects they are getting more for their money than ever. Today's low-end PCs pack more processing power than was available even two years ago.

"PC technology is getting cheaper and better," IDC analyst Loren Loverde said.

Consumers feeling confident about an improving economy are the primary driver behind the growing market. Businesses haven't increased spending as much as expected.

"The surprises on the trends are that it's predominantly consumer (driven), and businesses are lagging a little bit further than expected," Loverde said. "What we're expecting is business is going to recover more in 2004, and that's a broader base and should be a significant contribution to maintaining growth."

Besides consumer spending, the "dramatic shift" in the market from desktops to laptops has also been a key contributor to growth, IDC analyst Roger Kay said. The trend is expected to continue for several more years, while the rate of movement should slow.

In its regional outlook, IDC said consumers, the strongest segment in the United States, were expected to continue leading that market in the first half of 2004. PC purchases by the federal government are expected to expand outside of defense, while business spending continues to improve gradually. As long as the economy continues to improve, the United States is expected to lead the market recovery next year.

Consumers have played a key role in Western Europe, but the public sector has nearly matched consumer growth in recent quarters. While desktop demand is improving, notebooks have been the hottest items. Growth is expected to remain high in the fourth quarter, but relatively slow business growth and a strong euro are expected to limit shipments in 2004.

In Japan, fourth-quarter increases are expected to be in the single digits, with overall growth next year rising to the double digits, despite the already high penetration of portables. The Asia/Pacific region is also expected to record double-digit growth in 2004.

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