PC Market Growth Surges As Portables And Low-Cost Systems Drive Demand, According To IDC

FRAMINGHAM, MA – JULY 18, 2005 – The PC market again proved its resilience as worldwide shipments jumped to 16.6% growth in the second quarter, according to IDC's Worldwide Quarterly PC Tracker. Low-cost systems and portable adoption continue to be key market drivers, stimulating consumer adoption as well as commercial replacements. EMEA was once again a source of tremendous growth while other regions are also performing well. Worldwide growth was up more than 4% from May forecasts of 12.3%, while growth of 11.7% in the United States was in line with forecasts of 11.6%.

"This kind of growth in the PC market is just amazing," said Loren Loverde, director of IDC's Worldwide Quarterly PC Tracker. "At some point we expect the flood of consumer and portable demand to let up, but so far falling prices and demand across regions and market segments continues to support growth. Such consistent growth raises the prospect that the recent replacement wave is being supplanted by growing adoption that could sustain higher growth into the future."

"While desktop sales remain stimulated by record low prices, notebook adoption in the United States continues to accelerate," said David Daoud, client computing research manager at IDC. "Segments that have shown sensitivity to pricing have been reacting positively to incentive pricing while fully endorsing mobile computing. This trend of notebook adoption in the U.S. market is expected to remain strong well into the forecast."

Regional Outlook

United States – As expected, year-on-year growth in the United States recovered from a first quarter that was constrained by slow public sector spending and a difficult comparison to a year ago. Public sector and consumer demand improved in the second quarter, while the business segment remained solid.

EMEA – Growing competition in the consumer notebook market is increasing attention on low cost systems and fueling demand. Replacement and consumer activity, as well as investment related to European Union expansion and integration, helped boost overall EMEA growth above 20% after several quarters of growth in the high teens.

Japan – Consumer demand continues to recover gradually. Constrained by slow economic growth, competition from other consumer electronics, and high PC penetration, particularly of portables, growth is now rising in response to low prices and an aging installed base.

Asia/Pacific – Major markets continue to perform well with a notable rise in regional growth. Despite concerns of rising interest rates, oil prices, and efforts to manage the Chinese economy, business investment and consumer interest in low-cost PCs is accelerating the market.

Vendor Highlights

Dell – Dell had a solid second quarter, expanding its lead with worldwide growth of nearly 24%. Following a relatively slow first quarter performance, the company recaptured momentum with near 50% growth in Asia/Pacific, Latin America, and worldwide portable shipments.

HP – International shipment growth of nearly 23% helped HP stay ahead of the market with worldwide growth of 16.3%. HP saw strong demand in Europe, where it maintains the market lead, and in Asia/Pacific.

Lenovo – Lenovo appears to be working through its merger issues fairly well. Worldwide growth of 7.7% for the combined companies was up from a merged 6.8% in the first quarter, and only 2.1% for IBM in Q1 2005. Although year-on-year growth in the United States was down almost 12%, U.S. shipments increased over 9% sequentially. Asia/Pacific (excluding Japan), which now represents over 50% of the company's shipments, grew by over 18% year on year.

Acer – Acer continues to be very successful throughout EMEA, driving growth of over 65% with low-cost portables and desktops through an extensive distribution channel. The company also saw strong growth in Asia/Pacific and is developing operations in the Americas including a re-entry to retail in the United States.

Fujitsu/Fujitsu Seimens – Fujitsu Seimens continues to develop its European focus. While shipments in Japan have been flat over the past year, European shipments have grown by over 20% and now account for over 60% of the company's PC business.

Gateway – A year after its acquisition of eMachines and following distribution agreements with high profile channels, Gateway saw shipments rise by over 26% year on year. The growth is welcome evidence that the eMachines acquisition is bearing fruit and that the company will be ready for consumer, education, and small business sales in the second half of the year. Still, the growth comes after a fairly weak first quarter, and the company will need several quarters of solid growth to regain momentum.

Apple – Apple had another very strong quarter with growth of more than 37%. Growth in retail, Europe, and Asia/Pacific (excluding Japan) all grew by more than twice the worldwide rate. The iMac mini as well as the visibility and appeal of Apple's music business, including the iPod line, has clearly benefited the company's PC business and the company appears well positioned for education and consumer sales going into the second half of the year.

Top 5 Vendors, Worldwide PC Shipments, Second Quarter 2005

(Preliminary)

(Units Shipments are in thousands)

Q2 2005 Q2 2005 Market Q2 2004 Market Growth

Rank Vendor Shipments Share Shipments Share 2005/2004

———————————————————————-

1 Dell 8,982 19.3% 7,264 18.2% 23.7%

2 HP 7,251 15.6% 6,235 15.6% 16.3%

3 Lenovo 3,535 7.6% 952 2.4% 271.3%

4 Acer 2,032 4.4% 1,253 3.1% 62.2%

5 Fujitsu/Fujitsu

Siemens 1,722 3.7% 1,527 3.8% 12.8%

Others 23,044 49.5% 22,711 56.9% 1.5%

All Vendors 46,566 100.0% 39,941 100.0% 16.6%

3 Lenovo (Merged) 3,535 7.6% 3,283 7.1% 7.7%

Notes:

— Shipments include shipments to distribution channels or end

users. OEM sales are counted under the vendor/brand under

which they are sold.

— PCs includes Desktop, Notebook, Ultra Portable, and x86

Servers.

— PCs do not include handhelds. Data for all vendors are

reported for calendar periods.

— Data for Lenovo includes shipments for IBM PCD (including

Desktop and Portable PCs and excluding x86 Servers and

Personal Workstations) starting in Q2 2005, and only Lenovo

data for prior quarters. This reflects the legal status of the

companies, which merged during the second quarter of 2005.

Source: IDC, July 18th, 2005