Buying Behavior and Market Trends Hinder Desktop PC Advancements, While Price Compression Creates Opportunities for Mobile Computing, According to IDC

FRAMINGHAM, Mass., Dec. 1, 1998 – International Data Corporation (IDC) has just released two in-depth reports that provide key technology forecasts and high-level technology roadmaps, detailing an array of enhancements and their impact on pricing, user requirements, and platform evolution in the desktop and portable PC markets.

Beyond Today's Boundaries: The Evolving Desktop Platform finds that buying patterns in both the commercial and consumer desktop segments are delaying the adoption of cutting-edge PC platform advancements and pulling in the reigns on a market poised to take a giant step forward. In the portable space, the new report, Beyond Today's Boundaries: The Evolving Portable PC Platform, reveals falling prices and burgeoning technology, such as more potent processors and increased storage capacity, are beginning to create opportunities and open doors to a whole new class of user. This research examines the technology and design developments for a wide range of portable PC products from professional notebooks, to mininotebooks, to Jupiter class devices.

Desktop

The commercial desktop market is very mature and will make up nearly 60 percent of all U.S. unit shipments in 1998. Low-cost PCs are carving out a nice place for themselves on the desktop by offering business users a comfortable level of performance and a reduced price. These users are usually only interested in productivity applications such as e-mail, data entry, and word processing, and as prices dip below $1,000 this option becomes particularly appealing. Despite the attractiveness of some low-cost PCs, midrange systems still dominate the mainstream. Successful products will focus less on frills like multimedia and videoconferencing and more on technology enhancements such as faster CPUs and larger hard drives, while using lower-end graphics and audio to keep the price competitive.

Despite technological advancements, commercial buyers, especially those in larger organizations, require slow and methodical technology migrations and stable products to control management costs and keep the IS environment operating at optimal productivity. This softens the demand for _&non-core_8 attributes. _&Commercial buyers with large PC environments don’t like change,_8 said Roger Kay, Senior Analyst, Personal Systems. _&Although buyers know that change is inevitable, most are more interested in stable, predictable product roadmaps._8

In the consumer space, purchasers are becoming more in tune with their actual needs. The shift toward Internet connectivity and away from mainstream software applications that require the highest levels of performance has taken hold over the past two years. Users are finding lower-end systems, which don’t have all the bells and whistles, are meeting their needs to a large degree. This attitudinal change has inhibited adoption of new technologies, which are usually introduced on premium systems and then trickle down as volume and applications increase.

Additional Findings :

Universal serial bus (USB) is intended to facilitate PC use by replacing many of the disparate ports used today with a single, standard interface. This architecture enables end users to plug almost any PC peripheral into any USB port on the fly.

Declines in memory price equal major performance enhancements.

Graphics controllers have doubled performance each of the past two years, bringing more realistic 3-D to higher-end systems.

DVD will take hold in the consumer space, while CD-RW will be prevalent in commercial systems.

Increased revenue streams from higher-capacity communication technologies will drive a market for broadband modems and connections.

Portables

The portable PC market continues to advance at a breakneck pace. From thinner, lighter designs to increased performance, there are a number of key trends influencing technology directions in the portables market. In the center of it all lies new, lower-priced portable options, which are beginning to cause a stir. Reduced price points help position these products as viable alternatives to their desktop counterparts, and vendors are salivating over the new customer segment that is developing small business, students, multiple-PC households, etc.

The professional notebook segment, the bread and butter for many notebook vendors, continues to exhibit technology leadership. This class of notebook includes such features as Pentium II processors, 14.1-inch XGA thin-film transistor (TFT) displays, increased hard drives, and DVD ROM drives. Despite these robust features, prices have dropped over the last 12 months from $5,000-$7,500 to $3,500 $5,000. At the other end of the spectrum, Jupiter-class devices running Windows CE will have a serious impact on the portable PC market in 1999. These devices will be positioned as desktop companions, but will no doubt also be viewed as an alternative to traditional notebooks. Priced at $899 to $1,199, Jupiter-class devices will weigh 2.7-3.5 lbs., but will have their own set of limitations, such as keyboard and display size and application applets that offer fewer features.

The sub-$1,000 desktop phenomenon, which initially affected the consumer market, and is now affecting the commercial market, has resulted in increasing price pressure on notebook products. "A collapse in notebook pricing is redefining the low-end notebook's image, design, and features," said Katrina Dahlquist, Sr. Analyst, Mobile Computing. "Traditionally, notebooks priced under $2,000 were primarily end-of-life systems sold through retail and close-out channels such as price clubs and catalogues. Today, these products are priced under $1,500, and an increasing percentage of configurations are new designs at $1,499 price points."

Vendors in the portable arena are fighting to stay clear of the "commoditization trap" the challenge of building differentiated products without getting too exotic. Buying criteria has made a significant shift away from seldom utilized technology advancements and more toward reliability, durability, and service and support. As in the desktop arena, commercial PC penetration, especially in larger organizations, will be limited due to a reluctance for change; however, there is still strong demand among high-end users for the latest notebook design marvels.

Additional Findings:

Intel dominates the portable PC market, although AMD and Cyrix are making

progress.

Notebook form factor gaining increased storage capacity 10MB in 1998 and

15MB in 1999

DVD will take hold in consumer desktops, but demand in corporate notebooks

will remain low

The industry is migrating to 14" LCD displays

The PC card-based 56Kbps V.90 compatible modem will remain the mobile

professional's modem of choice in 1999

Windows 98 will not have a major impact on the portable PC market

These studies, Beyond Today’s Boundaries: The Evolving Desktop Platform (IDC #B16764) and Beyond Today’s Boundaries: The Evolving Portable PC Platform (IDC #B17161) are available for purchase at www.idc.com or by contacting Cheryl Toffel at 508-935-4389. For additional information on IDC's Personal Systems program, contact Patrick Gorman at 508-935-4369

About IDC

International Data Corporation is the information technology industry's most comprehensive resource on worldwide IT markets, trends, products, vendors, and geographies. IDC provides data, analysis and advisory services to the world's leading IT suppliers as well as IS professionals in finance, insurance, entertainment, advertising, consumer goods and publishing. IDC's research and opinions are based on the results of more than 300,000 end-user surveys, in-depth competitive analysis, broad technology coverage, and strategic analysis. IDC is committed to providing global research with local content through its 500 analysts in more than 42 countries worldwide. Additional information on IDC can be found on its Web site at http://www.idc.com.

IDC is a division of International Data Group, the world's leading IT media, research and exposition company.

# # #

All product and company names may be trademarks or registered trademarks of

their respective holders.