Updated from March 20
Notebook computer sales, the bright spot in a challenging PC market, will grow significantly less than expected in the current quarter, according to a new Wall Street report.
And the transition to
forthcoming Vista operating system will stall new desktop purchases throughout the year before sparking an upgrade cycle in 2007.
As a result, Lehman Brothers analyst Harry Blount trimmed his forecast of PC unit shipment growth in 2006 to 9.8% vs. his earlier expectation of 12.4% growth.
The report is the
second this month to throw cold water on the PC industry's near-term prospects. Earlier this month, industry research firm Gartner said PC sales in 2006 will grow by 10.7%, compared with the 15.5% rate in 2005.
According to the Lehman report, sales of notebook PCs are running below normal seasonality in the current quarter. While Lehman Brothers previously expected notebook unit shipments to be down 4% quarter over quarter, the firm now expects shipments to decline by 10% in the current quarter.
The dropoff is well below the 10-year historical range of notebook shipments, which is between a decline of 6.5% and an increase of 7.5%, according to Lehman Brothers.
The decline is not surprising, says Sam Bhavnani, the principal analyst covering mobile electronics at industry research firm Current Analysis. While notebook sales surged in 2005 as prices dipped below the $1,000 mark, 2006 is looking like a year of transition, says Bhavnani.
is expected to introduce a 64-bit notebook processor in the second half of this year, while
Advanced Micro Devices
is planning to release dual-core notebook processors.
All of these things, says Bhavnani, "lead to the decision of a consumer or a corporation to say, 'Hey, maybe I'm going to wait because there's some big advantages in computing that are just around the corner.'"
Lehman Brothers projects that notebook sales in 2007, while still strong, will be less than initial forecasts, with unit shipments increasing 18.2% year over year, compared to its previous estimate of 27.7% growth.
The firm cited tough year-over-year comparisons, as well as the relatively young notebook-installed base.
Lehman slightly trimmed its revenue projections for
, the top two PC vendors, as a result of the new market outlook. Lehman Brothers trades regularly in shares of Dell and H-P and has provided non-investment banking services to Dell and investment banking services to H-P in the past 12 months.
Although Lehman Brothers said that the Vista operating system may lead to a pause in PC purchases this year, it expects the new operating system to rejuvenate desktop sales in 2007, boosting shipments 6.3%, compared to a previous estimate of 0.3% desktop growth.
The firm also noted that PC sales outside the U.S. accounted for a greater share of overall sales in the fourth quarter of 2005 than in the past.