6/17/2010
By Carlos Guillen, Semiconductor Analyst

The signs continue indicating that the PC business is running strong. From a macro perspective, the slowly improving economic backdrop around the world will undoubtedly provide a boost to PC sales this year. China continues to grow strong, and the U.S. consumer appears to be ready to spend after holding back for quite some time. PC sales ran stronger than expected during the first quarter of the year, and we believe the corporate sector refresh is beginning to ramp up, partially influenced by the accelerating adoption of Windows 7.

Proving more support for the notion that PC sales are running strong, market research firm IDC announced that PC sales during the first quarter of 2010 had grown 27.1% from the level reached in the first quarter of 2009. It should be noted that the first quarter of 2009 represented a trough in the PC business as a result of the worldwide economic slowdown; however, at that time, the PC business declined by 7% on a year-over-year basis, so the 27.1% increased more than makes up for the year-ago drop.

It is encouraging the see that growth was not driven by cheaper priced PCs but actually by higher-end desktops, alleviating average selling prices. Breaking a trend that began in 2009, sales of net-books became a smaller factor driving volume in the beginning of 2010. And, although mid-range laptops still dominate the market, desktops PCs made a comeback, posting its first year-over-year growth since the middle of 2008, and commercial desktops posted its first year-over-year growth since the downturn. Growth was pervasive in all regions, particularly in emerging markets where sales volume reached a record high, growing by 37% on a year-over-year basis during the first quarter.

Looking ahead, IDC forecasts that global PC shipments will increase by 19.8% in 2010, surpassing the prior peak reached in 2008 as average selling prices improve as a result of a better mix of products. Net-book volume growth is expected to moderate, while desktop volumes should grow by 8% in 2010 as result of favorable comparisons and as a result of business replacements and the increasing popularity of all-in-one PCs. However, the main driver of PC growth will come from notebooks. As expected, emerging markets will give the largest boost to unit growth as it is expected to grow by 26.6% in 2010, while mature markets will grow at 13.6%.

Carlos Guillen
Wall Street Strategies