Tech Industry

PC shipments to decrease 4.5 percent in 2009

IDC updates its forecast of the PC industry's health for the year. Although it will be hit hard, it will not "go the way of the financial or auto industries."

As bad as the second half of 2008 treated the PC industry, 2009 is shaping up to be even worse.

PC shipments worldwide will drop 8 percent in the first half of this year, according to a forecast update Thursday to IDC's Worldwide Quarterly PC Tracker. The fourth quarter saw a 1.9 percent decline, driven in large part by large enterprise companies delaying buying replacement PCs during the recession.

But after a rocky start, the industry should turn around a bit by year's end. IDC predicts that shipments will improve over the second half of the year, resulting in small, but positive growth in the fourth quarter, ending with a 4.5 percent decrease for the year. That's a change from the 3.8 percent overall growth for 2009 the company had predicted in early December.

IDC's reasoning that the PC market will have to rebound is because it's driven heavily by replacement cycles, and though companies and individuals may be holding back during this volatile period in the economy, computers don't last forever, especially laptops, whose life spans tend to be shorter than those of desktops.

Though the current economic cycle is bad, it will get better, assures Loren Loverde of IDC. "Pricing will become more aggressive, and there will be further consolidation, but the PC industry will not go the way of the financial or auto industries in this cycle."

What should be more concerning, though, is the plummeting average selling price of those PCs, which is led by an increase in cheap laptops and Netbooks. Prices of PCs sold by Apple, Dell, Lenovo, and Hewlett-Packard dropped 5 percent during the fourth quarter of 2008, which led to an 18 percent drop in revenue for those companies, according to a report also released Thursday by Technology Business Research. But unlike shipments, which have dropped due to current economic factors and are expected to rise again--people will always need to replace their computers--prices aren't likely to rebound.

"The decrease in ASPs is structural and permanent," said TBR PC analyst Ezra Gottheil in a note distributed Thursday. If the industry is to rebound, he says, the most successful PC makers and software providers will figure out how to provide services after sales to increase their currently dwindling profit margins.