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A Day After Dell, PC Sales Estimates Rise

Bargain-happy consumers boosted PC sales in the second quarter, and will probably do it again in the third and fourth quarters, market researcher Gartner reported on Friday.

But the expected sales bump may also challenge margins. That's because there are signs that component prices are beginning to stabilize, so OEMs will no longer have the luxury of passing their savings along to consumers, said Gartner analyst Kiyomi Yamada.

The stronger-than-expected second-quarter PC sales, which were noted by Delll (DELL) in its second-quarter earnings announcement earlier in the week, prompted Gartner to up its PC sales forecast slightly for the rest of the year, but its outlook remains cautious.

Worldwide PC shipments are forecast to reach 39.8 million units in the third quarter of 2003, a 9.6 percent increase over the third quarter of 2002. Gartner had been expecting sales to grow by 8%. Gartner analysts project PC shipments to reach 161.3 million units in 2003, an 8.9% increase from 2002. Its previous forecast was for yearly growth of 7.2%.

Gartner's numbers include shipments of desktop and notebook computers, but not servers or handheld devices.

While consumers purchased PCs, especially notebooks, in larger-than-expected numbers, business purchases remained unimpressive, and may stay that way for the rest of the year.

"A sustained PC market recovery requires a return to business IT spending, which, in turn, is dependant on a significant improvement in economic conditions," said George Shiffler, principal analyst for Gartner's computing platforms and economics research. "Despite some recent encouraging signs, economists are still guarded in their outlook for the second half of the year, so the prospects for a significant business PC recovery by year end remain questionable."

Also guarded was Dell CEO Michael Dell: Small businesses and consumers have reacted faster than enterprises to price cutting, he said. "There haven't been a whole lot of reasons for companies to increase their IT budgets," Dell said during a conference call.

Roger Kay, an analyst with IDC, said his company's forecast won't be ready for a few more weeks, but he agreed that second-quarter PC sales were stronger than he had expected.

He added that strong sales of notebook PCs to U.S. consumers will likely prompt IDC to raise its yearly PC forecast for the U.S., but the worldwide picture was still unclear.

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