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Wither Desktops!

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DQI Bureau
New Update

Gartner has pulled a surprise from its IT crystal ball and said in its recent

PC market outlook that by 2007, three of the top 10 PC vendors will exit the

market. Currently, the top 10 worldwide PC vendors, by unit shipment, are Dell,

HP, IBM, Fujitsu/Fujitsu Siemens, Toshiba, Acer, NEC, Legend, Gateway, and Apple

Computer. However, only Dell has consistently posted profitable numbers in the

past several years. According to Gartner's clients' platform group vice

president, Leslie Flering, "With PC replacements still in full swing, 2005

should be a reasonably strong year for PC vendors. However, the end of the

replacement cycle is likely to strain viability for even the largest PC vendors

in 2006 and beyond."

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The report takes a daring dig at HP and IBM. It says, "The PC divisions

of HP and IBM are vulnerable to being spun off if their drag on margins and

profitability are deemed too great by their parent companies." On the

opportunities in emerging markets, the report forecasts that local PC vendors in

emerging markets should consider acquiring local rivals as a means to

consolidate home market position and arrive at economies of scale. In sum, the

report sketches challenging times for the PC industry and with slower growth

rates and reduced profit margins, the PC industry will face vendor

consolidation. The big question, however, (assuming the prediction goes right)

would be which are the companies that will exit and pave way for market

consolidation.

Going Forward with Pessimism



The latest prediction by Gartner on the PC industry is part of its

"Predicts 2005" reports. According to Gartner, 'Predicts' research

project spanned more than two-dozen technology and vertical industry focus

areas.

More than 140 analysts proposed and collaborated on approximately 150

predictions that will affect IT users, vendors and most industries in 2005 and

beyond. So with this doomsday prophecy what lies ahead for the global PC

industry? Two things, one: many in the industry would view it extremely forward

looking. Two: it is a clear warning siren that would enable many vendors to

re-think and re-orient their strategies. Moreover, this forecast should also be

contrasted with technology migrations and obsolescence patterns of the developed

geographies.

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Asia-Pacific

PC Unit Shipment Estimates, 3Q 2004

(in

thousands)

Company

3Q'04 3Q'04 3Q'03 3Q'03 3Q'03-3Q'04
Shipments Shares



Market
(%)
Shipments Market



(%)
Growth



Shares (%)
Lenovo 1,017.10 11.9 745.8 9.6 36.4
Hewlett-Packard 861.8 10.1 716.2 9.2 20.3
IBM 672 7.9 510 6.6 31.8
Dell

Inc.
616.8 7.2 473.1 6.1 30.4
Founder

Electronics
397.5 4.7 218.4 2.8 82
Others 4,951.50 58.1 5,094.00 65.7 -2.8
Total 8,516.70 100 7,757.60 100 9.8
Note:

Data includes desk-based PCs, mobile PCs, and IA32 servers.



"The growing prominence of emerging
markets could open opportunities for local vendors in those regions to

pursue global markets. Particularly in Asia-Pacific, leading local

vendors, such as China's Lenovo, appear well positioned to leverage

their strong local-market standing and low-cost operating models into a

global presence"



Source:
Gartner Dataquest (November 2004)

Meanwhile, in an Indian context, the emerging nature of the market might see

two interesting trends. One, the thinning of market shares for global PC vendors

in the West will force them to more aggressively target markets like India, with

lots of untapped potential for desktops. Two, this will further put huge stress

on Indian vendors who will struggle to sustain price-performance PCs. Will this

lead to big Indian PC vendors eating the smaller ones? If, by 2007, the PC

industry loses its terra firma, it would probably be the swan song for

assemblers in India.

Shrikanth G in

Chennai

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