Wither Desktops!

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."

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.

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