Analysts: Notebooks Warm Up PC Sales

Fueled by continued demand for notebook computers as well as consumer and corporate spending, worldwide PC sales in the third quarter of 2003 grew nearly 16 percent from last year, about 5 percent above projections, research firm IDC said.

The IDC report, reinforced by similar Gartner (NYSE: IT) findings of 14 percent growth compared with last year's third quarter, credits strong consumer spending and "phenomenal growth in portables" for the increase to 38.4 million shipments in this year's third quarter.

"Consumers in particular have reacted to low prices and wireless features," said Loren Loverde, director of IDC's Worldwide Quarterly PC Tracker. "Although commercial spending remains cautious, even this segment is making some progress."

IDC said the same consumer spending on portables that helped boost the growth of shipments also helped HP (NYSE: HPQ) narrow the lead of top PC vendor Dell, cutting the difference between the two to less than .5 percent of worldwide shipments.

Post-Bust Boost

IDC vice president Roger Kay told TechNewsWorld that the proportion of notebook shipments and increased consumer spending -- which drove growth in the second quarter -- accelerated during the third quarter.

"Aided by modest but sustained economic recovery in most regions, an aging base and great features and deals, the PC market finally got the boost everyone's been looking for," he said.

While smaller market segments have grown at a faster pace than commercial sales , Kay said he expects corporate PC spending to play a more prominent role in the fourth quarter, during which sustained growth is expected.

Notebooks Off the Charts

Kay indicated consumer demand for notebook computers continued to drive sales last quarter, referring to growth in the segment as "off the charts."

Desktop shipments were also up, though not as dramatically as notebooks, according to Kay, who emphasized the growth was achieved mostly through consumers taking advantage of low prices to purchase "digital entertainment machines" and other desktops.

IDC said the consumer and notebook trends in third-quarter growth also helped number-two vendor HP reduce leader Dell's advantage to 127,000 systems -- .3 percent of worldwide shipments. The top five vendors were rounded out by IBM (NYSE: IBM), Fujitsu, Siemens and Toshiba.

"They were well positioned this quarter," Kay said of HP. "In addition, HP is very aggressive on price these days."

Western Expansion

IDC credited solid consumer demand and increased government spending for a "major boost" in the U.S. market last quarter.

Referring to Europe's surge in PC shipments, Kay said the "strength was just unprecedented," adding that the strong growth in the United States and Europe was one of the few differences from the second quarter.

Kay, who called the PC market "a proxy for the overall economy," also said Japan did better than expected in the third quarter this year and is showing continued signs of economic recovery.

Holiday Expectations

Kay expects the growth will continue, pointing out that while 1998 could represent the last great holiday selling season in which PC makers got what they wanted, the industry could be in store for more holiday cheer this year.

Kay cautioned against high expectations because the recent quarterly growth has been driven by consumers. Still, commercial spending is expected to pick up as the year ends, he added.

"I'd be cautious about projecting a blowout holiday, but it's still going to be strong -- stronger than the third quarter was," he said.