Gartner Says Price Cuts Will Drive Double-Digit PC Unit Growth in 2006, But Revenue Will Decline; PC Manufacturers to Face Increased Competition from Consumer Electronics This Holiday Season.

STAMFORD, Conn. -- Worldwide PC shipments are on pace to total 233.7 million units in 2006, a 10.5 percent increase from 2005, however worldwide PC revenue is expected to reach $198.3 billion, a 2.5 percent decline, according to a preliminary forecast by Gartner, Inc.

"Unit growth will continue to be price driven for the next several quarters as PC replacement activity wanes and the battle between Intel and AMD escalates," said George Shiffler, research director for Gartner Dataquest's Client Platforms research program. "Steeper PC price declines will spur unit growth in mature markets like the United States over the near term, but growth will eventually slow to mid-single digits in these markets as PC replacements fade and saturation becomes more problematic. Vista's eventual release next year could stimulate some added growth, but we remain skeptical of Vista's impact."

"Steeper price declines will also drive faster growth in emerging markets," said Mikako Kitagawa, principal analyst for Gartner Dataquest's Client Platforms research program. "Growth should be more sustainable in these markets due to low penetration, expanding economies, and a growing number of PC ownership initiatives. Emerging markets are expected to post solid double-digit growth during the next two years."

PCs will have a difficult time competing for consumer wallet share this holiday season. Excess production capacity has lowered LCD panel prices, and that has dropped the prices of LCD TVs. The prices of many other consumer "life-style" electronics are falling as well, putting them in direct price competition with PCs.

"The battle between PCs and LCD TVs in particular is likely to be especially intense over the holiday season given that LCD TVs will almost certainly be backed by aggressive holiday marketing and even lower prices," Mr. Shiffler said. "Even the latest multifunction mobile phones could pose a threat with some buyers considering the prices of these phones and accompanying service contract is increasingly on par with low-end PCs. Vista's absence will definitely make it harder for PC vendors to maintain consumer interest in PCs without cutting prices."

Additional information is available in the Gartner report "Dataquest Insight: 3Q06 Update, Global PC Forecast Scenarios, 2006-2008." The report provides a preliminary assessment of the PC market with a breakout of deskbased and mobile PC shipments in both mature and emerging markets. The report is available on Gartner's Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=496071&subref= simplesearch. (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

Gartner analysts will provide more detailed analysis regarding the PC industry during the Gartner Symposium/ITxpo, taking place October 8-13 in Orlando. Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts. Attendees rely on Gartner Symposium/ITxpo to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency. Additional information is available at www.gartner.com/symposium/us.

About Gartner

Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for its clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,700 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit www.gartner.com.