Margins for desktop PCs are being squeezed as customers switch to laptops. Lower laptop prices and the appeal of wireless connectivity are being credited for the switch, says international research firm Gartner.
According to Gartner`s preliminary forecast, worldwide PC unit shipments are on pace to grow 12.7% this year, however, worldwide PC revenue is forecast to grow 0.5%. Gartner predicts 31% growth in worldwide mobile PC units.
Worldwide PC unit shipments are projected to total 206.6 million in 2005, with PC revenue totaling $202.7 billion. In 2006, worldwide PC units are expected to grow 10.5%, but PC revenue will decline 0.4%.
Gartner analysts say the disparity in growth rates is attributable to continuing declines in the average selling price (ASP) of PCs.
"The quest for growth is forcing vendors to test the limits of PC price elasticity," says 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."
The drop in mobile PC ASP has been particularly remarkable, says analyst, Mikako Kitagawa. "PC vendors have succeeded in increasing the unit share of higher margin mobile PCs, but this has resulted in a significant sacrifice of desk-based revenue as vendors struggle to maintain the value proposition of desktops at the low end of the market."
ASPs are likely to remain under strong downward pressure, says Gartner, because of mounting cost pressures, but on-going ASP declines will eventually slow, especially if PC component prices firm.
"However, as recent earnings announcements illustrate, vendors are facing strong competitive pressures. These pressures are only likely to intensify if unit growth slows. Vendors may have little choice other than to cut prices or offer more lower-cost, de-featured machines," Shiffler says.
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