PC price war on top of economic slump: Gartner

Mobile and desktop PC prices in the United States will drop this year as direct PC vendors reduce profit margins and ignite an “intense battle for market share, ” according to market research firm Dataquest Inc., a unit of Gartner Group Inc.

Dell Computer Corp. and Gateway Inc., according to Dataquest, will endeavor to win market share from channel vendors Compaq Computer Corp., Hewlett-Packard Co., and IBM Corp.

The direct vendors’ weapon will be lower margins, causing “others to give serious thought about how they run their PC business,” said Dataquest Group Vice President and Research Fellow Martin Reynolds in a statement. Global vendors might shift their share from the United States, he said, leaving the U.S. national vendors out in the cold.

Despite the economic slowdown, Dataquest forecasts a 10.7 per cent growth in desktop and mobile PC shipments for 2001. Total shipments are expected to grow from 130.5 million units last year to 144.5 million units this year.

However, the researchers warned that if “concerns about recessions in the United States and world economies were to be realized” PC shipment growth “could fall into the single digits for 2001.”

Growth across-the-board is expected to slow down, said Dataquest, citing the general economic situation as well as the saturation of important PC markets, like the United States, Canada and Western Europe. In these markets the industry depends on hardware replacements for shipments to grow, according to Dataquest.

In less saturated markets, like Latin America, the industry might be able to stimulate growth through “judicious price-cutting and shrewd marketing campaigns,” said Dataquest, but those efforts could “well be undercut by poor economic circumstances.”

Further into the future Dataquest is currently forecasting a sequential growth of 14.5 per cent to 165.5 million units shipped in 2002. After that growth will dip to 8.6 per cent, 179.7 million units, in 2003 and pick up a bit at 9.7 per cent, 197.2 million units, in 2004.

Gartner Group, in Stamford, Conn., can be reached at http://www.gartner.com/.