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 Back to 2005 Press Releases
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PC Industry Must Prepare for Further Upheaval, Warns Gartner |
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| PC manufacturers are already struggling to remain profitable but greater challenges lie ahead as PC virtualisation takes hold |
Egham, UK - 2 November 2005: Gartner today warned that the PC industry faces huge upheavals as highly standardised products, low margins and oversupply continue to push the market toward a "race to the bottom" in the pricing of products. Over the same period, the introduction of disruptive technologies will create additional risk for PC vendors by presenting them with technology investment decisions that they cannot afford to get wrong. In particular, the arrival of hardware support for PC virtualisation will challenge the established relationship between PC hardware and software, placing PC vendors in the middle of a tussle for control of platform development between key component suppliers.
Analysts predict that annual PC shipment growth will average eight percent between 2006 and 2009, but revenues will remain flat, leaving many vendors to struggle for survival. Emerging market growth and mobile PC adoption will be the key unit growth drivers over the period.
The formerly safe profits in mobile computing are under attack as plentiful component supplies enable a price-driven market expansion. "The growing gap between realistic levels of profitability and shareholder expectations will intensify pressure on PC vendors registered in the United States, Japan and Europe, opening up the market to emerging market vendors which have lower labour costs and/or more modest margin objectives" said Brian Gammage, vice president at Gartner.
Many leading PC suppliers have operated at near-zero margins since 2001. PC vendors' problems have been exacerbated by an apparent inability to differentiate their product offerings through anything except price. At the same time improvements in hardware performance have outstripped the growth in requirements from mainstream applications, allowing users to buy cheaper and more basic machines. Earlier cost cutting has left vendor sales channels and agents unable to adequately communicate the value of PCs to potential customers.
Despite the price declines, Microsoft and Intel have maintained their per PC revenues at near constant levels over the last two to three years. With most vendors finding it increasingly difficult to fund further price reductions from internal costs, Gartner expects Microsoft and Intel will also come under increasing pressure to innovate to maintain market growth and profitability from PCs.
"The key question for the industry is when and how quickly these changes will occur," adds Mr Gammage. "Initially, the changes will be gradual, but are likely to see rapid acceleration as the industry trades volume for margin. Such acceleration could be precipitated by macroeconomic conditions, or a further slowdown in replacement buying.
"In addition, at a time when the PC industry is going through this upheaval, the development of PC virtualisation will create extra risks for the suppliers of PCs unless a broadly supported standard is established," said Mr Gammage. "If the suppliers driving these developments cannot agree quickly on standards, the introduction of hardware-based virtualisation will add to the challenges for PC manufacturers. They are cautious about embracing innovation and cannot afford to back the wrong implementation." PC Virtualisation technology decouples PC hardware from software. The technology is highly disruptive as it can be used to make different PC hardware look identical to software. Gartner believes that PC virtualisation is key to unlocking innovation across many market segments. Hardware support for it is now being embedded in PC processors and chipsets by Intel and AMD.
Gartner concludes that although the changes in the marketplace will result in a healthier global PC industry, it will be a challenging period of adjustment for the industry and users.
Press Contact:
For further information about the Gartner Spotlight entitled 'The PC Industry Must Prepare for Upheaval', or to speak to Mr Gammage, please contact Bite Communications on Tel: +44 (0)20 8834 3508 or email: gartner@bitepr.com.
Brian Gammage will share additional information on the outlook of the PC industry at Gartner's annual Symposium/ITxpo, 7-11 November at Cannes in France. For more information and to register for Symposium/ITxpo visit http://www.gartner.com/eu/symposium.
About Gartner Symposium/ITxpo:
Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts. Attendees rely on Gartner Symposium/ITxpo to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency. An integral part of the Gartner Symposium is the ITxpo showfloor, where more than 80 technology companies will give attendees and press an opportunity to see and experience the latest technology solutions.
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About Gartner:
Gartner, Inc. (NYSE: IT) is the leading provider of research and analysis on the global information technology industry. Gartner serves more than 9,000 clients, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company focuses on delivering objective, in-depth analysis and actionable advice to enable clients to make more informed business and technology decisions. The Company's businesses consist of Research and Events for IT professionals; Gartner Executive Programs, membership programs and peer networking services; and Gartner Consulting, customized engagements with a specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has more than 3,900 associates, including more than 1,200 research analysts and consultants, in more than 75 countries worldwide. For more information,
visit www.gartner.com.
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