PC prices continue to drop

With Asda offering PCs for under £300, it's definitely a buyer's market in the PC sector

The cost of a PC will drop substantially over the next couple of years, according to latest figures from analyst group Gartner.

Revenues from sales of PCs worldwide will grow by just 0.5 percent this year to $202bn (£112bn), despite total shipments being expected to grow by 12.7 percent to 206.6 million desktop and laptop PCs, the group reported on Monday.

The outlook for 2006 is even more stark — Gartner forecasts shipments rising a further 10.5 percent, but total sales revenue falling by 0.4 percent, compared to 2005.

While this trend may be bad news for vendors, who face a steady decline in the average sale price of a PC, businesses and consumers can look forward to getting much more for their money.

"The quest for growth is forcing vendors to test the limits of PC price elasticity," said George Shiffler, principal analyst for Gartner's Client Platforms research. "The whole dynamic is compounded by the fact that buyers have increasingly come to expect sharp price declines."

Last week, UK supermarket chain Asda confirmed it plans to start selling PCs for under £300. The eSys PCs come with 256MB of RAM, a 2.4GHz Intel Celeron processor and a 40GB hard disk, and will be sold in Asda's 271 stores for £279 from 25 August.

Much of the projected growth in PC sales is being fuelled by laptop sales, Gartner reported, with worldwide mobile PC units forecast to grow 31 percent in 2005. This trend has forced vendors to cut the price of entry-level desktop machines, to make up for their lack of portability.

On ZDNet UK's price comparison channel on Monday, PCs from both HP and IBM were listed with recent price cuts of up to 20 percent. An HP Compaq Business Desktop dc7100 with a 2.8GHz P4 was listed for £525.23 -- 22.4 percent, or £151.57 off its previous price. An IBM ThinkCentre A35 with a 3GHz P4 meanwhile was listed at £351.33 - £47.69 or 11.95 percent lower than its price last week.

silicon.com's Andy McCue contributed to this report.