No surprise: PC demand to remain weak

Market researcher Dataquest on Monday warned of continued slow PC sales, with worldwide sales growing 10.7 percent this year, or about four points lower than 2000.

Market researcher Dataquest on Monday warned of continued slow PC sales, with worldwide sales growing 10.7 percent this year, or about four points lower than 2000. Sales in the United States are projected to be downright dismal with, at best, flat year-over-year growth.

Dataquest analyst Martin Reynolds said the researcher's predictions are based on "the assumption sales in the fourth quarter will be better than the rest of the year. If this doesn't happen, things could be much worse."

In fact, should a recession hit the United States instead of a second-half recovery analysts had been banking on, Dataquest expects negative growth compared with 2000.

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Although the economy is a factor, it is not the only reason behind the PC sales crisis. "The U.S. PC market by and large is saturated," Reynolds said. "There really isn’t much of an opportunity to sell systems and growth is slowing down."

Dataquest wasn't the only analyst outfit delivering up gloomy prognostications Monday. Merrill Lynch analyst Steven Fortuna cut his worldwide PC unit growth to 7 percent from 12.5 percent and lowered revenue growth to minus 2.8 percent.

"All of our checks suggest that PC demand remains weak, especially in the U.S.," Fortuna wrote in his research note. The analyst slashed U.S. unit growth projections to 1 percent from 7.5 percent, Europe to 5 percent from 8.5 percent, Japan to 12 percent from 19.5 percent and Asia-Pacfiic to 17 percent from 23.5 percent.

But Fortuna had some good news, predicting some sales pickup next year. He raised worldwide unit growth projections to 15.5 percent from 12.8 percent, also predicting an 8.1-percent year-over-year revenue gain.

Dataquest also held out some hope for 2002, but not necessarily the following years. The analyst firm predicted worldwide growth of 14.5 percent next year, 8.6 percent in 2003, 9.7 percent in 2004 and 7.9 percent the following year.

But the market's uncertainty, given uncertain global economic conditions makes predictions hard to gauge. Many analyst firms had expected more than 20 percent worldwide PC growth last year. January preliminary estimates put the figure at 14.5 percent. Dataquest has since revised the final tally to 13.6 percent growth.

As recently as late January, Dataquest put 2001 worldwide growth estimates in the mid teens. But global sales uncertainty has forced yet another revision.

No matter what the ultimate outcome, Reynolds was conclusive in his assessment the U.S. looks to be a tough market that will ultimately force consolidation. On Friday, Micron Electronics said it would exit the PC business. Reynolds said to expect more of this.

"We expect one of the major PC players to leave the PC business by 2005," he said, referring to Compaq Computer, Hewlett-Packard and IBM.