PC unit sales across UK distribution were off to a bleak start in the first quarter of 2011. Our data show that volumes registered a consolidated decline of seven per cent during the period, versus last year, and ten per cent compared with Q4 2010.
The extent of this downward trend took most of the industry by surprise, although expectations had not been high, following a weaker than expected pre-Christmas season and the resulting excess inventory on retail shelves. Year-on-year unit growth dropped by more than 20 percentage points from Q4's 14 per cent growth rate.
So where did things go wrong?
It is clear that notebooks, which represented most PC sales with a share of 69 per cent in Q1 2011, accounted for much of the consolidated PC unit decline. Notebook volume sales fell 11 per cent in Q1 from the same quarter last year.
And, within the notebook segment, netbooks declined by as much as 43 per cent year-on-year in Q1 across UK distribution. The netbook share of the portable segment fell from 34 per cent in the year ago quarter to 21 per cent this year. Taking netbooks out of the equation actually resulted in a positive portable unit growth of five per cent in Q1 versus last year - although that is still down from the second half of last year.
Surely the strong growth rates that followed their initial launch, while helping to push consolidated PC growth throughout most of 2010, were impossible to keep up. Further, users have over time become increasingly aware of the limitations of netbooks. Netbooks are likely to represent a smaller - albeit still significant - market share in 2011.
Meanwhile, the decline in business notebook sales could not be offset by the low double-digit growth in consumer system sales.
In mainstream Windows portables, sales of those based on a business OS declined six per cent in Q1 versus last year. Sales of those based on a home OS rose 11 per cent in the same period.
Clearly, while consumer demand slowed in Q1 but still yielded growth in unit terms, businesses delayed their spend ahead of the April Budget.
The desktop segment, the second-largest PC category with a share of 22 per cent in Q1, also contributed to this quarter's consolidated PC unit decline. Desktop sales across UK distribution shrank four per cent in Q1 from the year-ago quarter.
Of all desktops based on Windows going through UK distribution, sales of those with a consumer OS declined 37 per cent year-on-year during the quarter.
Our channel sources noted that sales suffered from considerable excess inventory from Q4 2010, coupled with a slowdown in consumer demand.
While x86 server sales also slid year-on-year, PC workstations and tablet PCs sales grew in Q1. Tablet PCs, while still only three per cent of overall PC sales through UK distribution, did best - posting unit growth of 464 per cent during Q1, compared with the same quarter last year.
Government austerity measures as well as rising global inflation are likely to keep affecting UK PC sales. We can expect, however, that Windows 7, where it was not initially picked up for economic reasons, will drive new purchase cycles in the commercial space as we move further into 2011.
In the consumer segment, much over the next few quarters will depend on how quickly the current excess inventory can be cleared. In the meantime, slate PC sales are likely to continue to do well, and to benefit from the increasing variety of products, capabilities and price points that is expected in coming quarters.
Marie-Christine Pygott [pictured] is a senior research analyst at Context
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