Western Europe PC Market Analysis, 3Q06: IDC Raises Short-Term Notebook Forecast Driven by Stronger-than-Expected Back-to-School Performance

In 3Q06 the Western European PC market experienced a healthy rebound with overall unit shipments increasing by 7.8% versus a forecast of 4.5%. The stronger than expected performance underlined IDC's assumption that the slowdown in 2Q06 was temporary and was mainly due to increased levels of inventory coupled with slower consumer demand during the World Cup. The healthy trends across the region were stimulated by strong portable uptake. This has encouraged IDC to slightly raise its PC growth projection for the final quarter of the year with the market forecast to expand by 8.8% versus 7.7% as in the previous forecast. As a result, overall growth in the Western European PC market is expected to reach 7.0% for the full year 2006.

Key growth assumptions for 2007:

"According to IDC, notebook demand will show sustained strength and will continue to drive overall market growth in 2007," said Eszter Morvay, research analyst for IDC's EMEA Quarterly PC Research Group. With attractive promotions in the retail starting as early as October, the run-up to Christmas is expected to be buoyant with 4Q notebook sales projected to increase by 20.4%, contributing to an overall growth of 20.3% for the full year 2006. The shift towards mobile platforms, especially in the consumer and SMB segments, will continue unabated in 2007, stimulating further expansion in the notebook market by 17.2%.

Desktop demand is expected to remain subdued in the short-term and IDC forecasts the desktop market to stagnate at -0.7% in 4Q06, which will bring the overall decline to 2.7% for the full year 2006. Following a slow start in 1Q07, desktop demand is expected to pick up, fuelled by a new rebound in IT investments in the enterprise sector. As a result in 2007 growth will return to positive trends at 2.9%.

Over the forecast period, PC market dynamics will be driven by strong consumer sentiment boosting household spending across the region. "Western Europe will be increasingly characterized by replacement demand with second-time buyers opting for higher-end configurations even at a price premium. This trend is expected to compensate for the continued price erosion of entry-level systems, and therefore resulting in the stabilization of overall ASP levels," she added.

Commercial demand will remain primarily driven by increasing notebook adoption in the SMB space, and to a lesser extent in the corporate sector. Large organizations will continue to prefer deskbound systems as the main computing platform, in order to lower their TCO, tighten security and ease manageability and deployment. A new cycle of corporate refreshes, commencing in 2H07, will help lift demand levels across all form factors.