Aggressive prices and inventory clearance activity by Intel contributed to lower PC prices in the just-gone quarter.

The impact of CPU price cuts varied among regions. In the US and Asia/Pacific, the cuts boosted shipments, while in Europe, the Middle East and Africa (EMEA) where there remains a higher-than-normal finished-goods inventory, shipments were adversely impacted.

Global challenge

"On a worldwide basis, large vendors continued to gain share at the expense of mid-tier vendors and system builders," said Charles Smulders, vice-president of Gartner's Client Computing Group. "The price cuts during the quarter undoubtedly helped the large vendors, as they were able to put more pricing pressure on the smaller players. Intel's accelerated ramp on its new CPU lines will expose those vendors who have not invested enough in tools and processes to manage their supply chain."

In the second quarter of 2006, the top five vendors accounted for nearly 50 per cent of the worldwide PC market. These vendors all grew faster than the overall industry average. Dell maintained its number one position in worldwide PC shipments, as it continued to grow much faster outside the US. HP continued to show strength in the worldwide market, backed by solid consumer growth, mainly in mature markets.

The PC market in the US grew by 6.4 per cent, as shipments reached 16.6 million units in the second quarter. Dell grew at the industry average in the US.

Consumer chain reaction

"The consumer market continued to lead the US PC market, as mobile PC shipments remained strong. Accelerated price declines associated with the CPU oversupply stimulated additional mobile demand," said Mikako Kitagawa, principal analyst for Gartner Dataquest's Client Computing Markets Group. "The professional market experienced slow growth, mainly due to the sluggish sales in the large enterprise market, however the small business market continued to grow steadily."

In the Europe, Middle East and African (EMEA) region, PC shipments totalled 16.7 million units in the second quarter of 2006, a 7 per cent increase from the same period last year.

"For the first time since the first quarter of 2003, the region experienced a single digit growth. The vendors seemed in denial of this cyclical downward trend and few had enough flexibility in their business models to adequately adjust to rapid market dynamics change," said Ranjit Atwal, principal analyst for Gartner's computing platform group in EMEA.

The slower growth was exaggerated by the vendors and the channel trying to reduce high PC inventory positions as well as working to ensure Restriction of Hazardous Substances (RoHS) recycling directive compliance. The inventory build-up in the distribution channels had been apparent for a year but neither the vendors nor the distributors took enough action to deal with the problem, leaving the vendors with difficulties shifting inventory in a weaker market.

The consumer market experienced good growth in mobile PCs but was subdued by negative growth in the desk-based market. Price erosion will continue unabated and, combined with Intel's early price cuts having been matched by AMD, Gartner anticipates that the market will reach double-digit growth in both segments.