IDC PC forecast revised downward as recovery stalls

Market research firm IDC lowered its forecast for 2003 PC shipment growth again Tuesday, citing a slower economic recovery than expected and the spread of severe acute respiratory syndrome (SARS) in Asia.

The company expects PC shipments to grow 6.3 percent to 145.2 million units worldwide in 2003, down from the 6.9 percent growth predicted in March. That number had been downgraded from last December's expectations of 8.3 percent growth, which was lowered due to a drop-off in public sector spending.

"We are seeing a recovery now, it's just not a very robust recovery," said Roger Kay, vice president of client computing for IDC.

The public sector weakness is expected to continue in the U.S., but consumers are expected to pick up the slack, IDC said. PC shipments to consumers in the U.S. are expected to grow 10.8 percent in 2003, compared to growth of 6.5 percent worldwide. However, IDC sees stronger corporate demand for PCs worldwide during the rest of 2003, with growth of 6.2 percent expected, as compared to corporate shipment growth of 2.3 percent in the U.S.

The corporate growth comes from the long-awaited PC upgrade cycle that corporations have been putting off amid budget concerns. In the 1990s, conventional wisdom held that corporations upgraded their PC infrastructure every three years, as processor and component technology improvements increased productivity. However, the last major PC upgrade cycle came during the preparation for the Y2K bug, and many businesses have been making do with PCs purchased in 1999 or 2000.

"There's a small number of good reasons not to upgrade: It costs money, and the PCs you've got now work pretty well," Kay said. But concerns such as increasing worker productivity and rising maintenance costs are mounting as companies realize they can't make their older PCs last forever, he said.

Another reason that the replacement cycle is less pronounced than expected is the lack of a single event such as Y2K to motivate corporations to make PC purchases, he said. Therefore, the recovery is spread out over several quarters, and less noticeable, he said.

Worldwide, unit shipments are expected to regain the losses suffered since the economic downturn began in 2000. In 2000, 140.1 million units were shipped, according to IDC, falling to a low of 134.6 million in 2001.

The effect of SARS in China appears to be easing, but it was responsible for holding down consumer purchases as people stayed home, Kay said. One side effect of the outbreak is a tilt toward direct Internet PC purchases in China away from retail purchases, he said.

Shipments to businesses in western Europe are expected to grow 3.9 percent, up from flat growth in the fourth quarter of 2002, IDC said. But in Japan, a weak consumer market for PCs is expected to result in a 1.2 percent decline in PC shipments to Japan, the company said.

Even as unit shipment growth regains some momentum, revenue is expected to decline in 2003, Kay said. The total shipment value of PCs will decrease 2.4 percent in 2003 as the average selling price of a PC continues to fall, he said.

IDC is a division of International Data Group, parent company of IDG News Service.

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