No recovery seen in PC market during 2003

Despite higher sales forecasts, both corporate and analyst opinion is that a recovery in the desktop personal computer market may not happen this year or any time in the foreseeable future.
Gartner, a research firm, predicts worldwide PC sales in 2003 will grow 6.6 percent over 2002, keeping slightly ahead of global inflation rates.
And according to research firm ARS Inc., when businesses are buying, they are buying on the cheap. ARS research shows that for the same amount of money spent in 2001, companies can now buy a PC that is more than twice as fast and has four times the memory and almost four times the hard disk space.
Silicon Valley’s largest PC maker, Hewlett-Packard Co. of Palo Alto, says its PC unit is among its poorest performing businesses.
“Looking ahead we see stronger demand for notebooks versus desktop PCs, reflecting a shift toward mobility and the attractiveness of richly featured notebooks as desktop replacements,” HP CEO Carly Fiorina said in a May 20 conference call to analysts. “In the enterprise market overall, IT spending remains muted and there are no signs of a large-scale PC refresh cycle taking hold.”
Those comments did not go unnoticed on Wall Street, where analysts reflected upon corporate focus on return on investment (ROI) in technology spending.
“This is in line with our view that a fundamental change in the customer base to more ROI-sensitive, traditional corporations makes it unlikely that there will be significant spikes in PC demand as there have been in the past,” wrote Bill Shope, a New York-based analyst with JP Morgan Securities Inc., in a May 21 research note. “Overall, HP’s cautious comments on PC demand suggest that a broad recovery is unlikely to be a 2003 event. In addition, we believe that enterprise spending on servers is likely to be relatively stronger than PC spending throughout the rest of the year.”
Shope declined further comment. JP Morgan engages in investment banking for HP.
Desktop PC analyst Toni Duboise with ARS says with shrinking profit margins, PC makers continue to shrink away from the desktop.
“Absolutely. That’s why you have all of your major PC manufacturers focused beyond the box. This is no secret,” she says. “They are not making money on PCs anymore and they haven’t been making money on PCs for some time. That’s why they are investing in services and selling accessories. While we are in a beleaguered market and having economic woes, the real story here is that it is a PC buyers market.”