PC market to continue to grow, if less dramatically than in past

The Outlook

March 31, 1996|By Mark Guidera and Michael Dresser

FOR PERSONAL computer manufacturers, 1995 was a very good year, indeed. The PC industry had sales growth of 22 percent and revenue growth of more than 27 percent. But several industry forecasts point to a big slowdown. One market forecast, by La Jolla, Calif.-based Computer Intelligence Corp., predicts that unit sales of PCs will increase by 12 percent in 1996, about half of last year's growth, while revenues will improve by 9.3 percent, about one-third of last year's gain. How accurate are these forecasts? Will a PC sales slowdown have a ripple effect on the rest of the computer industry? If so, who will suffer?

Scott Miller

Senior Industry Analyst, Dataquest Inc.

We're a bit more optimistic about the corporate PC market than others. There's no evidence that corporate IS [information systems] departments are going to cut way back this year. What's happening is that a lot of IS people are waiting to decided whether they'll go with Windows 95 or they'll go with a strategy based on the next version of Windows NT, which should be due out soon. They need to make that decision before they move ahead with hardware purchases because you want a PC strategy that will last at least three years.

So we think sales in the second half of the year will be much stronger in the United States than the first half. There won't be the dramatic gains we saw last year, but it won't slow down as much as others are predicting. We're estimating sales growth in the U.S. for the corporate PC market at about 15 percent this year. It's a funny market. We're so used to seeing these 20 percent sales growth figures that anything under that seems like a big deal. The other thing to keep in mind for the PC market is that while the U.S. is a big market that's slowing down, other parts of the world are going to show some big gains. Europe will have 20 percent growth this year. Japan is growing so fast it's hard to predict, maybe between 20 and 40 percent. And Asia next year will be incredible.

Harris Miller

President, Information Technology Association of America.

There's no doubt that the dramatic rate of growth for PCs will slow down from the 25 to 30 percent [in the U.S.] that we've been seeing. Hardware has become very commoditized. The profit margins are very thin. The hardware guys have been in a cutthroat battle for five or six years now. The smartest players have diversified, like Texas Instruments and Motorola. Look at IBM: Their second largest business is service; their third is software.

Also, while the U.S. market may have reached a critical mass, there's a big global market out there, much of which is not yet tapped. I don't think such forecasts for the PC market are accurate in terms of what's happening in the computer market as a whole. People tend to have this misimpression that the PC market is the whole industry. The computer market is also software and telecommunications and the Internet and a whole lot else. That's where the growth is and where the real money is to be made.

Neal Goldsmith

Publisher, BusinessTech, Internet-based periodical

It's tempting to predict the crash of the computer industry, but I don't think that's what's happening.

The market for specialized desktop computer equipment goes down, but the overall market for computerized devices or computer-merged devices or computer-enhanced devices goes way, way up. So it's not so much a dissolution of the computer industry as a diffusion of it into every other industry.

Computers will fade into the background. One of the reasons we have a computer on our desktop is that we interact with it by eye and hand, and that's why we need a keyboard and mouse and a screen. Once they have the capacity to take commands from us verbally, then we don't need keyboards any more. Then the system can be embedded into the infrastructure, like a light switch.

Those companies that manufacture exclusively special purpose desktop computerized devices should probably think about redefining themselves or expanding their definition of what it means to be a computer company.

James F. Halpin

President and chief executive officer, CompUSA Inc.

I haven't seen any softening in the corporate PC side of our business. In fact we're seeing double-digit sales growth this year, and expecting that to continue. We've already upgraded a lot of our corporate customers with new hardware. They want a six-month lead before the next Windows NT is out. I'm not sure how these forecasters can know what's going to happen. It's just guessing. If you look at the U.S. market, you see that less than half of the homes have yet to buy a PC and a lot of businesses have old hardware. The bulk of businesses in the U.S. are still bTC using the old 386s. They're at that point where they know it's time to move up. So we expect a very strong market this year.

Pub Date: 3/31/96

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