IDC: Transition to Mobility and Corporate Renewals to Drive 9.3% Growth in German PC Market in 2008

Following a slight contraction in 2006, the German PC market returned to positive trends as overall PC shipments recorded a solid 10.5% increase year on year in 2007. Strong notebook sales drove overall market dynamics, especially in the consumer and SMB spaces, reaching growth of 23% and 30% respectively over the previous year. The desktop market continued to contract, declining by 3%, directly impacted by the transition to mobility in the consumer and SMB segments. However, corporate demand helped maintain overall volumes, leading to double-digit growth in corporate desktop sales, thanks to the new wave of renewals in the enterprise space.

"IDC expects the German PC market to continue to display healthy trends in the coming quarters and forecasts over 9% overall growth in 2008", said Eszter Morvay, senior research analyst for IDC's EMEA PC research group. "The key engine of growth will be unrelenting demand for mobility, boosting notebook sales by close to 20%. As a result, the share of notebook shipments is expected to reach around 60% in 2008, up from 55% last year."

In 2007, the German PC market was primarily driven by SMB demand for notebooks, as businesses continued to shift to mobile platforms and SOHO users benefited from attractive deals in the retail channel. The renewal of the installed base and the replacement of desktops by notebooks will remain key drivers of SMB growth in 2008. Assisted by further price declines, SMBs will benefit from better connectivity and security features, along with dedicated products, support, and services, as vendors and channels try to differentiate themselves among intensifying competition. As the transition to mobility continues in 2008, desktop shipments to SMBs are expected to be adversely impacted and are forecast to decline for the fourth consecutive year.

However, desktop volumes saw a healthy recovery in the corporate segment, benefiting from the new wave of enterprise hardware refreshes starting in mid-2007. As the segment almost solely relies on renewal demand, growth is largely dependent on PC life cycles. With the average PC life cycle at around four years, the corporate market showed a healthy rebound in 2003 to 2004, while the new cycle, which lifted the market in 2007, is expected to continue into 2008, boosting unit shipments across both desktops and notebooks.

Following the disappointing sales levels in 2006, the consumer PC market also experienced a healthy recovery in 2007, with overall growth reaching more than 8%. Market buoyancy was primarily supported by strong notebook demand, propelling growth to over 23%, while desktop sales continued to decline. Higher employment rates and stronger private consumption are expected to contribute to healthy consumer trends in 2008. Notebook renewals and further expansion of the installed base through multi-equipment purchases will remain the key engine of growth in the consumer space. However, consumer desktop volumes will continue to suffer from the sustained shift to portability and the weakness of the consumer desktop value proposition, leading to further contraction of volumes and market consolidation.

Retail will remain key to reaching consumers, and with the entry of new players Dell and Lenovo, as well as the merger of Acer with Gateway and Packard Bell, it is likely to become even more competitive. The growing share of etailers, along with the expected development of the telco channel, will also contribute to offering new routes to market. As the competitive environment intensifies, the market will continue to see further price erosion. In 2007, average PC prices in Germany dropped by 16% year on year to an average of 700 (less than 650 for a desktop including monitor and less than 750 for a notebook). In 2008, IDC expects a further overall decline of close to 13% year on year, but the absolute price level will remain higher than in other mature economies such as the United Kingdom, France, and Italy.

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