Are PC makers poised for major hit?

A third of today's top 10 manufacturers could exit the PC business by 2007, according to a new report.

As many as three of the top 10 PC manufacturers may be forced out of the global PC market by 2007, a new report by Gartner predicts.

The report, published Monday, said that lower demand for PCs between 2006 and 2008 will spur the next round of consolidation in the PC market. Earlier this month, Gartner cut its forecast for fourth-quarter PC shipments.

Dell, Hewlett-Packard and IBM rank as the world's top three manufacturers in unit shipments, while Fujitsu, Fujitsu-Siemens, Toshiba, NEC, Apple Computer, Lenovo Group and Gateway rank fourth through 10th.

Gartner predicts annual unit shipments of 11.3 percent and annual revenue increases averaging 4.7 percent between 2003 and 2005. Despite that relatively profitable period, 2006 will bring tougher times as demand for new PCs slows and competition between vendors increases, the research firm said.

Many businesses and consumers will have replaced their oldest computers by the end of 2005, completing the latest PC replacement cycle. As owners typically replace desktops every four years and notebooks every three years, that should leave demand slack between 2006 and 2008. That period will see average annual unit shipment and revenue growth slow to 5.7 percent and 2 percent, respectively, Gartner predicted. So-called emerging markets such as China will deliver the best growth during that time, but will be unable to offset slack demand elsewhere, the Gartner report added.

If the predictions hold true, the 2006-to-2008 time frame will make for better times than 2000 to 2002. The market contracted in 2001 and grew only slightly in 2002, leading to the blockbuster Hewlett-Packard-Compaq Computer merger. Micron Technology also sold its Micron Electronics PC arm, now called MPC Computers. Gateway, whose financial troubles began during that period, acquired eMachines in March and embarked on a massive restructuring.

Gartner said that lower revenue and unit shipment growth in 2006 through 2008 will be just as traumatic for manufacturers as it was in years prior.

The research firm stopped short of predicting which of the top 10 companies is most likely to stumble. Instead, it laid out several scenarios. Facing the potential of slower growth, some manufactures might acquire or merge with others, as HP and Gateway did, or firms

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