PC market to shrink for first time since dot com crash

Vendors bumping against rocky bottom

iSuppli thoroughly dampened any PC industry euphoria in the wake of Intel's happy results yesterday, predicting that this year will show the first overall contraction of PC shipments since the dot com crash.

Intel reported a better than expected second quarter yesterday, with the fastest revenue climb in 20 years, and predicted a return to seasonal growth for the rest of the year.

However, iSuppli forced the corks back into the bottle by predicting that overall PC shipments for the year will drop four per cent to 237.3 million units. The firm had previously forecast a 0.7 per cent rise in shipments this year.

The main damage appears to have occurred in the first half, with flat shipments in the second quarter, and sequential rises in the third and fourth quarters. The third quarter will be down year on year, but the fourth quarter should show year on year growth of 3.6 per cent. Next year should rise 4.7 per cent on 2009.

As the firm's principal analyst for computer platforms Matthew Wilkons pointed out: "An annual decline in unit shipments is highly unusual in the PC market. He said the last year on year decline was back in 2001, when the market dropped 5.1 per cent in the wake of the dot com bust, as VC-engorged web startups suddenly keeled over en masse.

Unsurprisingly, it is desktops which are showing the biggest decline, with shipments expected to plunge 18.1 per cent to 124.4 million, while entry level servers will slip 9.5 per cent to 6.9 million units.

That leaves notebooks - and netbooks - as the only segment likely to show growth, specifically by 11.7 per cent to 155.97 units. Which the sharp-eyed among you will have noticed means notebooks will have outstripped desktop shipments - a first, said iSuppli.

Years ago, this would have been a cause for celebration for PC vendors and their silicon suppliers. This is not necessarily the case now, as notebook prices - specifically netbook prices - have come down so low. At best, vendors might comfort themselves with the fact that netbooks have gotten so small and light that people are likely to lose them, necessitiating replacement purchases.

Still, the PC industry is looking for anything that looks like good news right now, and even the imminent launch of a Microsoft operating system is seen as a beacon of hope.

But iSuppli points out, the crucial enterprise sector is still looking anaemic. Until those big spending corporates loosen their purse strings, PC vendors will still be on short rations. ®