Hardware News

Tight quarters for PC makers

John G. Spooner CNET News.com

Published: 02 Sep 2003 15:05 BST

PC makers will be hoping for the best during the fourth quarter but must plan for the worst.

With the holiday shopping season nearing, there's reason to feel positive. Businesses are beginning to buy small numbers of PCs again, and consumer sales continue to gain strength. PC shipments are expected to post a healthy profit for the year, according to recent forecasts from Gartner.

But several factors could derail companies that can't make quick adjustments to market conditions. For one thing, higher demand and lower inventory have allowed suppliers of components, such as LCD screens and dynamic RAM, to put the brakes on price cuts. Outright shortages, unheard of during the past two years, have also been showing up, with Intel, for instance, unable to meet requests for some of its processors.

Given the volatility of the market, PC makers must walk a tightrope, with their profits in the balance. If they can get the right components at the right prices, they can in turn offer buyers the kind of values that will have them reaching for their credit cards and purchase orders during the holiday season. If not, they'll be scrambling to stimulate demand by cutting prices too deeply and offering costly incentives.

Manufacturers do have at least one new trend working in their favour -- if only it could hold. Because prices on desirable technology, such as portable PCs and flat-panel displays, are lower than in past years, buyers can now see more value in a given PC and aren't necessarily as driven by price alone. Consumers are snapping up notebooks and flat-panel displays at record rates at retail, despite the fact that lower-priced desktops and CRT monitors abound.

"The combination of wireless networking, DVD recordable drives and flat-panel monitors have made people more interested in the core products -- desktops and notebooks," said Steve Baker, an analyst with NPD Group. "The evidence is there in the sales numbers. Notebooks have legs, and desktops have turned the corner."