PC shipments up but revenue on the decline

Gartner report shows negative results as many in the channel predict hard times ahead

There was little surprise for channel players as Gartner’s latest report showed that although worldwide PC shipments are on the up, revenues have slumped.

PC shipments will rise by 12.7 per cent in 2005 and total revenue will amount to $202.7bn, a growth of just 0.5 per cent this year, with a decline of 0.4 per cent expected next year. Sales growth of 10.5 per cent is predicted for 2006, but margins will continue to tighten.

Positive results were recorded in the laptop segment, with growth of 31 per cent predicted for 2005 caused by lower prices and improved wireless applications.

Meike Escherich, principal analyst at Gartner, said: “The second quarter has taken most people by surprise as it was a lot better than expected. However, sales are rising, but revenue is dropping rapidly.

“The UK market has become so saturated that most firms will have to live off replacement systems. Growth will fall over the coming years and revenue will continue to decline.”

Escherich added that vendors could find themselves in trouble as customers demand a higher spec, but will not pay a higher price.

Mike Lawrence, managing director at VAR Bentpenny, said: “You only have to look at Time going bust and Hewlett-Packard (HP) cutting back to see the whole market is in turmoil.

“Margins are being squeezed and on hardware they are very tight. This will continue and people will find themselves out of work. It is not a happy scene for the future.”

Sue Richards, managing director at HP reseller EBM, said the market has been flooded with cheap, lower-quality products that have affected margins. “Prices have gone down on everything and so revenue has gone down on everything. Now a process of re-education is needed to make consumers understand it is important to pay for quality,” she said.

“Customers who buy cheap will pay for it in the end. If things go wrong they will simply end up spending more on back-up and support.”