U.K. PC market continues to benefit from buoyant notebook demand throughout 2006, says IDC

LONDON, UK – JUNE 2, 2006 – The first quarter of the year displayed trends in line with forecasts for the U.K. PC market. Overall PC shipment growth in the U.K. reached a modest 3.5% in 1Q, penalized by slowing desktop trends and limited corporate replacement activity, but the proliferation of entry-level price points in the notebook space boosted portable PC sales by over 20%. And the trends observed during the second quarter show little sign of any slowdown for the second half of the year.

"Falling notebook prices with offerings at as low as GBP399 including VAT resulting from fierce vendor competition across all channels propelled consumer notebook shipments by 29.4% in 1Q, and consumer demand for notebook is expected to grow unabated in 2006," said Michael Larner, a senior research analyst in IDC's European Personal Computing group. "As the market moves towards a larger replacement market in 2007 to 2008, one can expect higher-end specs and large-screen multimedia offerings to increase share over time, but 2006 is likely to remain price and volume driven with continued erosion of notebook prices expected to assist a solid 31% growth for consumer notebook sales in 2006." Fiercer competition between the direct and retail channels – aggressive push from Dell, increased number of retailers, and growing online sales – is also increasing competitive pressure.

Commercial notebooks also displayed healthy results in 1Q and are expected to maintain robust double-digit trends leading to a solid 21% for the year, driven by strong desktop replacement trends in the SMB market and increasing notebook penetration in the corporate segment. Increased wireless solution offerings and announcements of 3G-enabled notebooks from Dell, Fujitsu Siemens, and Acer, teaming up with mobile providers such as Vodafone and T-Mobile, will also assist continued business portable adoption.

Desktop sales are expected to remain inhibited by limited corporate replacement activity, due to start picking up in 2H07, and portable migration in the SMB space. On the consumer front, slowing desktop demand observed in 1Q06, coupled with the delayed launch of Vista, which was potentially set to provide a boost in the back-to-school and Christmas seasons, may also prevent a larger rebound in consumer desktop sales in 2H06. Sales levels will depend on vendors' ability to promote a stronger value proposition around new Mediacenter-type products.

While growth is expected to return to healthier levels in 2007 and 2008, as the market will benefit from the next business renewal wave and OS migrations, price erosion and declining margins are nevertheless making the market increasingly challenging for all vendors. The results observed in the first quarter clearly outline the trend towards market concentration around international players, while local players need to occupy niche areas to survive.

Vendor Performance Highlights Dell continued to consolidate its leadership in the U.K. market with 11% year-on-year growth. The direct vendor maintained a strong number 1 position in both the desktop and notebook markets, while continuing to close the gap with HP in the x86 server space. Dell captured a large share of the limited corporate renewal activity by serving the commercial market effectively and an increased and successful focus on mobility, while very attractive offerings boosted the vendor's consumer shipments.

HP recorded very positive trends in the U.K. in 1Q, returning an impressive 20% growth driven by a strong performance in particular in the consumer notebook market, but the vendor also managed to post positive growth in the desktop market. Notebooks remain where HP recorded its largest success thanks to a strong product portfolio and aggressive pricing strategies on both the SMB and retails channels.

Acer continued to gain share in the U.K. with solid growth of its notebook sales, while the vendor also benefited from increasing consumer desktop volumes. Acer maintained price pressure in the notebook space, contributing to drive a fierce competitive environment between the vendors, but also between the retailers themselves through aggressive promotions sold through Comet and in the SMB space through traditional dealers or etailers.

Toshiba achieved a very healthy 22% growth this quarter, far outstripping the overall PC market, which allowed the vendor to gain fourth position in the overall ranking and regain second position in the U.K. notebook market.

Toshiba benefits not only from a strong product portfolio and an effective positioning on multimedia platforms but also from a broad range of revenue segments and a strong position in the education segment. Furthermore, Toshiba managed to drive volumes without participating in the low-end notebook price war.

NEC/Packard Bell recorded a disappointing performance in the U.K. during 1Q. Packard Bell suffered from lower demand for consumer desktops in the retail channel as well as a difficult year-on-year comparison in the notebook space, where intense competition has made it hard for the vendor to maintain the share taken last year. NEC displayed positive trends in the commercial space, however.

Shipments are branded shipments for all form factors (including desktop, notebooks, and x86 servers) and exclude OEM sales for all vendors. Data for all vendors is reported for calendar periods.

For more information on IDC's EMEA Quarterly PC Tracker or other IDC Personal Computing research services, contact Research Director Karine Paoli, +44 (0) 20 8987 7218, or email kpaoli@idc.com. Alternatively, contact your local IDC office.

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