Slower Outlook for PCs

By Paul Carton and Jim Woods

It's hard to escape the depressing headlines these days, and that's pretty much what we've been finding in the PC sector -- but there are glimmers of hope.

ChangeWave's latest survey on consumer PC buying shows weaker demand for the holidays, yet there are some positive signs for Apple (AAPL) and, surprisingly, for Dell (DELL), too.

The ChangeWave survey of 3,699 consumers, conducted Oct. 23 to Nov. 3, focused on personal computer demand for the next 90 days.

PC Market Ain't What It Used To Be

One year ago, 11% of respondents surveyed said they planned to buy a laptop within 90 days, compared with only 8% in the latest survey. A similar drop has occurred for desktops, with the number of respondents planning to purchase one dropping from 8% in November 2007, to 6% currently.

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The PC slowdown is occurring in tandem with the weakest holiday spending levels ever recorded in a ChangeWave survey for electronics. Typically, we see a big pop in electronics spending for the holidays, but not this year.



Only 19% of respondents said they'll spend more on consumer electronics during the next 90 days, compared with 43% who said less -- a net 40 points worse than one year ago.

New Apple MacBooks Gaining Traction

Despite the soft purchasing environment, Apple and its newly revamped MacBook line are managing to gain traction with consumers.

The new Apple MacBook features an aluminum unibody enclosure and improved graphics, as well as a glass multi-touch trackpad. Seven percent of respondents said they're likely to buy one over the holidays.

Another 6% said they're likely to purchase the original MacBook, which Apple recently lowered the price on to $999.

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Overall, 33% of respondents said they plan to buy an Apple laptop during the next 90 days -- up four points since September -- while 27% said they plan to buy an Apple desktop, a one-point increase.



But before you start thinking everything is rosy for Apple as these numbers represent an improvement over our September survey, they're still below our August results. And in terms of desktops, they're two points below those of a year ago.

Moreover, the uptick for Apple is occurring in the context of a rapidly shrinking PC market.

Nevertheless, it's not easy to increase market share during the worst spending environment in years. And thanks to their refreshed MacBook line, Apple is doing just that.

A Surprise for Dell

Something unusual is happening with Dell: For the first time in almost three years, Dell consumer planned purchases look upbeat.

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First, planned purchases of Dell desktops have taken a surprising leap -- jumping 11 points to 37%. And planned purchases for Dell laptops are up two points to 33%.



To find out more about Dell's rise, we asked those respondents who said they're purchasing a Dell PC during the next 90 days to tell us why.

The overwhelming response? Dell currently offers the best value.

As one respondent said, Dell provides "competitive pricing, wider availability in retail outlets, and its Vostro line offers clean hard drives with no garbage programs preloaded -- and Windows XP is an option."

Some consumers are purchasing Dell PCs as a holiday gift. One respondent told us, "I like it as a replacement for my older machine and as a gift. The pricing is such that they qualify as a high-end gift for close, older family members who have no PC."

The above comments notwithstanding, tremendous caution is needed in assessing the latest survey results on Dell.

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First, consumer purchases represent less than 20% of Dell's overall PC revenue. The vast majority of the company's revenue comes from the corporate market. And it's on the corporate front that the IT spending pullback in 2008 has had a brutal impact on Dell and other PC manufacturers.

Moreover, there are no signs that the overall PC market will be improving in the near future. In fact, the recession in corporate IT spending continues picking up steam.

That said, after a long, three-year slide in market share, the current upturn is welcome news for Dell, and perhaps a sign that there's a light at the end of the tunnel for the former industry leader once the economy starts to improve.

Hewlett-Packard Results Mixed

Hewlett-Packard (HPQ) recently announced earnings that surprised to the upside due to the company's cost-cutting initiatives, and its worldwide, well-diversified portfolio of products and services.

But in terms of HP's U.S. PC sales outlook, our survey shows mixed results for the company during the next 90 days.

Planned consumer desktop purchases are down four points to 17%, while planned laptops are up two points to 22%. (Note that about 70% of HP's sales come from outside the United States, whereas our surveys focus primarily on the U.S. market.

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Paul Carton is the Director of Research for the ChangeWave Alliance Research Network. Jim Woods is a Senior Editor for ChangeWave. The Research Network is a group of 20,000 highly qualified business, technology and medical professionals -- as well as early adopter consumers -- who work in leading companies of select industries. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

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