Consumer Notebook Sales and Ultraportable Adoption Will Continue to Support Growth in German PC Market Throughout 2008, Says IDC

LONDON – July 2, 2008 – In the first quarter of 2008, the German PC market performed above expectations, with growth reaching 17.4% year on year as overall PC shipments for the quarter reached over 2.72 million units. Buoyant notebook market momentum was the key engine of growth, as consumers and SMBs continued to benefit from aggressive price cuts due to the fierce competitive landscape and the ongoing strength of the euro. Notebook sales grew by 44.4% year on year. The accelerating transition to mobility continues to inhibit desktop demand in the consumer and SMB segment, where shipments continued to drop sharply. However, with the German economy healthier and more stable than two years ago, corporate renewal activity was strong in 1Q08, boosting sales of both notebooks and desktops.

"IDC expects the German PC market to continue its recovery throughout 2008, supported by an improved economy and an overall catch-up after two years of slower growth compared with the rest of Europe. Overall PC shipments are expected to grow by 11.9% in 2008 in unit terms," said Lucie Jichova, research analyst for IDC's EMEA PC research group. "The key driver of growth throughout 2008 will be the continuing demand for portable PCs, with double-digit trends expected in the consumer segment, thanks both to renewal activity and expansion of the installed base, as well as ultraportable adoption."

In the SMB space, PC manufacturers benefited from a number of larger notebook deals in 1Q08 as the sector continues to replace its installed base with mobile solutions. Throughout the rest of 2008, IDC expects SMB notebook sales to be assisted by a strong vendor push in the channel in conjunction with vendors' reinforced go-to-market strategies to target SMBs more effectively with dedicated products, support, and services. However, the continuing transition to mobility will keep inhibiting desktop sales in this segment.

The wave of corporate refreshes that started in mid-2007 continued in the first quarter of the year, as there have been a number of enterprise and public sector tenders for both notebooks and desktops. In particular, Fujitsu Siemens won a number of desktop deals in the government and utility services sector, which boosted its performance in 1Q08, with the vendor strengthening its dominance in the commercial desktop and notebook markets in Germany. However, current global economic concerns may lead to more cautious spending throughout the rest of 2008 in sectors such as finance, which could postpone some renewals to 2009.

The consumer climate was healthy in 1Q08, contributing to solid sales of consumer notebooks. IDC expects strong demand for notebooks to continue throughout 2008. Furthermore, attractive new offerings based on the Intel Montevina and AMD Puma platforms, which are due to hit the shelves in the second half of the year, will boost consumer notebook momentum. In addition, ultraportable PCs will become more popular throughout 2008, thanks to the increased affordability of new Internet-centric devices. Due to consumers' preference for mobility, the improving price/performance ratio of notebooks, and the availability of new, appealing notebook designs, the value proposition of desktop computers is declining, and shipments of consumer desktops are expected to keep falling. In order to weather some of the effects of declining desktop sales volumes, vendors will respond by differentiating their product offerings, concentrating on higher specifications and targeting high-value-added segments such as home entertainment and gaming.

Retail will remain key to reaching consumers, and with the entry of new players Dell and Lenovo, and the expanded branding strategy of Acer after the acquisition by the Taiwanese company of Gateway and Packard Bell, it is likely to become even more competitive. The importance of the telco channel is set to increase, as vendors are likely to start new partnerships with telecom operators to offer deals that bundle Internet subscription with free (or reduced-price) notebooks. For example, Asus has already agreed on a strategic partnership with T-Mobile and plans to roll out joint offers for the Eee PC with a USB stick for UTMS and HSDPA connectivity and accompanying T-Mobile tariff options. This new route to market is likely to reach consumers who have never owned a PC before and are looking for basic surfing devices. Such attractive offers, along with the rising share of etailers in the consumer market, are likely to contribute to the continuing decline of PC prices. Vendors are already feeling the pressure, but the absolute price level is likely to remain higher than in other mature markets such as the U.K., France, and Italy.

IDC's EMEA Quarterly PC Tracker gathers PC market data in 55 countries by vendor, product category, sub form factor, brand, user segment, channel, processor, and notebook screen size. The research includes historical and forecast trend analysis as well as price band and installed base data. For more information on IDC's PC Tracker service and its related deliverables, please contact Karine Paoli, associate vice president, IDC EMEA Personal Computing group (kpaoli@idc.com), or visit www.idc.com.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For more than 44 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company.

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