PC market set to fall further

Research firm IDC has slashed its expectations for PC sales, saying it now expects to see a 1.6 per cent decline in PCs shipped this year - the first decline in PC volume since 1985.

A continuing price war between PC makers means revenues will fall even more sharply - down 10.6 per cent.

The new figures are distinctly more negative than those issued by IDC in June, when it said PC sales would grow by 5.8 per cent.

The figures also gave a gloomy outlook for 2002. Revenues are expected to decline by a further two per cent, rather than the two per cent rise previously predicted.

The slump in sales is now producing what many see as the worst PC market in at least a decade. A season of mass lay-offs and restructuring at PC makers culminated last week in the $25bn takeover of Compaq by HP, which will see at least another 15,000 jobs go.

Shares in HP and Compaq have fallen more than 20 per cent since the news broke, with most pundits reading the merger as simply a sign of how bad the market has got. Shares in HP are now at their lowest level for six years.

Even Dell, widely seen as the winner in the battle for the PC market, has seen its share price halve in just over a year.

Last month one-time PC giant Gateway revealed it is abandoning Europe entirely in a wide-ranging restructuring operation. Japanese technology giant Fujitsu, another big PC maker, is also in difficulty, having axed 15,000 staff in August.

PC-makers' last hope is that Microsoft's forthcoming launch of its latest operating system - Windows XP - will generate more excitement than anticipated and bolster sales of new machines with the software pre-installed.