U.S. PC Sales Growth Bottoms Out in Q3 ’06

PC sales growth in the United States sputtered to a halt in the third quarter of 2006, showing zero increase compared to last year, as vendors turned to strong overseas markets to generate revenue.

Worldwide, PC shipments grew 9.1 percent in the quarter, thanks to 13.5 percent growth outside the United States, according to a report released Wednesday by IDC.

The U.S. market has been slumping for several years, dropping from 10 percent annual growth rates from 2003 to 2005 to just 5 percent growth in the first half of 2006. But no one expected it to reach zero so soon, IDC said. Microsoft’s launch of the Windows Vista OS and business equipment refreshment cycles could inject some life back into the market through 2007, but the long-term U.S. forecast won’t rise above 8 percent from 2008 to 2010.

Despite the warnings, many companies failed to see the change coming. Dell and Intel have both said they shortchanged their revenue in recent quarters by slashing prices to preserve market share. Both companies mentioned in recent earnings conference calls that they had been too aggressive on pricing, and didn’t see the soft market coming.

PC vendors are still expected to sell 66.1 million units in the United States during 2006, including desktops, notebooks, ultraportables (though not handhelds) and x86 servers. But that number is dwarfed by sales in the rest of the world, expected to reach 163.3 million this year.

Most of that worldwide growth comes from developing countries and portable PCs, since Europe and Japan have also posted slow growth in recent quarters, said Loren Loverde, director of IDC’s Worldwide Quarterly PC Tracker. At the same time, IDC has scaled back its growth forecasts for mature markets, citing slow growth in desktops and commercial replacements. Future growth in the industry will be found in emerging markets and increasing specialization in designs.

IDC forecast U.S. PC sales to grow 6.9 percent to 70.7 million units in 2007, and 7.7 percent to 76.1 million units in 2008. In comparison, the worldwide market as a whole will rise 11.3 percent to 255.4 million units in 2007 and 10.9 percent to 283.2 million units in 2008, IDC said.

-Ben Ames, IDG News Service (Boston Bureau)

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