PC saturation blamed for market stagnation

Recent analyst reports on fourth-quarter 2000 PC sales in both the consumer and commercial markets have begun to confirm what many in the IT industry have suspected.

“It is clear that technology has entered a global recession,” said Ashok Kumar, an industry analyst at U.S. Bancorp Piper Jaffray Inc., in Menlo Park, Calif.

Calling 2000 “the year that never was” for PC sales, Kumar blames the current technology recession on a fourth-quarter 2000 saturation of PCs in the consumer and commercial markets in the United States.

“Given the inventory position, we expect PC [sales] to be the leading indicator of IT spending recover,” Kumar said.

Findings from IDC in Framingham, Mass., confirmed that PC saturation in the United States caused sales to take a nose-dive last year. U.S. shipments of all PC form factors declined 1.7 per cent year on year and dropped 6.1 percent sequentially to 12.3 million units, according to an IDC report.

“The country’s PC installed base has been expanding at a much slower rate than previous quarters,” the report said. “A general malaise in retail sales dampened fourth-quarter [2000] PC sales in the consumer market. The commercial market, while having shown some signs of a comeback, was also sluggish [in the fourth quarter of 2000],” the IDC report continued.

The worldwide desktop PC market grew five per cent in 2000, but unit shipments of desktop PCs fell in the United States by 4.3 per cent, the IDC report said.

Looking forward, IDC expects PC sales in the United States to remain slow. “The market is responding to a deteriorating economic environment as well as increasing signs of saturation in both consumer and commercial markets,” the report said.

Kumar agreed. “We do not believe there will be a sustainable cyclical recovery [in PC sales] until [the second half of 2002.] [The second half of 2001] will not be a period of economic recovery but a full-fledged recession, which should result in negative unit growth for the PC market in 2001 – a first in its history,” Kumar said.