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PC sales growth to fall off in '98

Research house IDC forecasts 13 percent growth for the PC industry in 1998, down from 15 percent last year.

Despite the financial turmoil facing Compaq and other vendors who are having trouble managing inventory levels as sales slow, International Data Corporation (IDC) is forecasting 13 percent growth for the PC industry as a whole in 1998.

The predicted growth in shipment volume is a slight decline from 1997's growth rate of 15.2 percent. Total shipments are expected to reach 90.6 million units in 1998, compared to 79.9 million units in '97, according to IDC.

Already there are indications of a slowing pace of growth.

Last week, Compaq said sales would drop 34 percent from the quarter before. The PC giant blamed the loss primarily on slow sales to commercial markets. The news followed Intel's revelation that it was going to fall far short of already diminished expectations for quarterly results because on softer-than-expected demand for its processors in North America and Europe.

PC sales volumes have not been increasing fast enough to make up for continuing price reductions, resulting in revenue shortfalls for some vendors. Companies like Compaq are working to better gauge demand by implementing new distribution strategies, but these kinds of changes will result in continued turmoil throughout 1998, IDC says.

"The range and depth of current market changes point to a profound shift in industry business models, concentration of power, distribution strategies, and product mix," said Bruce Stephen, IDC's group vice president of worldwide personal systems research, in a prepared statement.

In spite of the turmoil, the largest vendors will still be able to reap the benefits of continued strong demand in the U.S. and "solid" growth in Western Europe. Compaq, IBM, Dell, and Hewlett-Packard are likely to grab the lion's share of this growth, the report says, based on their broader product lines and reach in foreign markets.

IDC is forecasting a 15.4 percent growth in U.S. PC shipments, compared to 19 percent in 1997. PC demand outside of the U.S. will be strongest in Western Europe, with a 13.8 percent growth rate expected to offset slow or negative growth in the Asia-Pacific countries.

Japan will have a modest rebound from 1997 results, with an expected 7.3 percent growth based on increased consumer interest in the low-cost PCs that flooded the U.S. market over the last year, according to the report.