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PC Ecosystem Review and Global Markets Update

Worldwide personal computer (PC) shipments are expected to grow by 4.2 percent in 2011 -- down from a February forecast of 7.1 percent, according to the latest market study by International Data Corporation (IDC). A combination of declining first quarter shipments, an increasingly conservative economic outlook, the relative saturation among developed market consumers, and competing products will lead to slow growth during the remainder of 2011.

For 2012 through 2015, total PC market growth is still expected to fall in the 10 to 11 percent range.

Consumer PC purchases have been a cornerstone of growth over the past five years. During this time, a transition to low-cost portables helped drive purchases by new users in emerging markets -- as well as replacement and secondary systems in more mature markets.

Consumer PC shipment growth averaged 18.9 percent from 2005 to 2007, almost 7 percent faster than commercial shipments. During 2008 and into 2009, consumer growth was actually faster at more than 21 percent while commercial growth fell below 3 percent in 2008 and then dropped to 10.5 percent during the recession in 2009.

The growth in 2009, which was independent of the economic pressures following the housing bubble, banking crisis, and related recession, was largely fueled by the mini notebook (also known as netbook) boom. Consumers in mature regions snapped up over 19 million netbooks in 2009 vs. just 6.6 million the prior year, and the jump accounted for over 80 percent of volume growth in the segment.

Emerging regions also got a bump from netbooks, which added 7 million units in 2009, accounting for roughly half of growth in portable PCs. However, the appeal of low prices for mini notebooks has given way to a number of factors, including relative saturation following this boom cycle, recognition of their limitations, and better competition from both mainstream notebooks and media tablets -- which increased 31 million and 17.9 million units in 2010 respectively vs. just 1.3 million for mini notebooks.

"Consumers are recognizing the value of owning and using multiple intelligent devices and because they already own PCs, they're now adding smart phones, media tablets, and eReaders to their device collections," said Bob O'Donnell, vice president at IDC. "And, this has shifted the technology share of wallet onto other connected devices."

The potential boost to the PC market from thinner designs, longer battery life, instant on, touch, and other improvements will likely not be widely available until 2012, and will have to address price-sensitive buyers in order to drive higher levels of growth. In fact, the appeal of these future enhancements could be seen as another motive for consumers to delay the purchase of a new PC until they are available and to focus on other products in the meantime.

First quarter 2011 PC shipments were down 1.1 percent from the prior year, with a decline of 4.4 percent in consumer shipments that was only partially offset by 3.0 percenet growth in commercial segments. However, the decline in consumer shipments was particularly acute in mature regions, with double-digit declines in Western Europe, the U.S., and Canada. Relatively strong growth in the second quarter of 2010 is likely to keep second quarter 2011 growth low.

This trend in consumer growth, along with only modest growth in the commercial sector, a cautious outlook from PC makers, disruptions including the Japan earthquake and nuclear disaster, the Arab Spring, and reduced economic projections (including government stimulus) will keep overall growth in single digits the rest of 2011.

Nevertheless, IDC expects significant growth in both consumer and commercial markets to continue beyond 2011. New designs, chips, operating systems, features, and services, along with falling prices will continue to make PCs more powerful, affordable, and functional than ever before.

Despite incursions by smartphones and media tablets, PCs have a large user base and ecosystem, and continue to represent the most comprehensive and affordable computing platform. Adoption by new users in emerging regions as well as replacements in more mature markets will continue to drive double-digit growth through the end of the forecast.

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