PC sales growth slows

And the margins have gone through the floor

PC sales have shrunk to 15 percent annual growth from 25 percent in 1994, with margins at 1.3 percent compared with 30.1 percent in 1995. Average selling prices in the US have dropped 10 percent so far in 1998. However, the top four PC makers -- Dell, Compaq, HP and IBM -- still only account for 37 percent of the market, which confounds theories that markets shake out to one dominant player. The reason? Let's call it competition. The big four will get bigger, according to Mark Specker, a financial analyst with SoundView. He said that IBM is growing at 150 percent of the market rate, and Dell at 400 to 600 percent. Compaq should be OK since half its income is from server sales. He also sees Packard Bell NEC, Acer, AST and most European vendors (with the possible exception of Siemens) declining. The emphasis now is the server and workstation market where there are still profits to be made. Nobody seems to be mentioning that in their haste to compete with the anticipated $500 NC, the PC industry rendered itself unprofitable in the consumer market. Now falling prices will wipe out any profit from growth. ®

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