2004 to end on un-PC note

Citing concerns that computers aren't topping holiday wish lists, market research firm Gartner has cut its forecast for fourth-quarter PC sales.

The firm predicted on Monday that worldwide PC sales would hit 51.9 million for the quarter, up 10 per cent from last year but below earlier forecasts. For the year, Gartner now envisions growth of 11.4 per cent over 2003, down from its prior forecast of 13 per cent.

Gartner analyst Charles Smulders said in a telephone interview: "As we move forward into the fourth quarter, we continue to have a concern about a lack of must-have PC features, as well as budget competition from other consumer-electronics devices."

In particular, Smulders said, desktop sales in the United States came in weaker last quarter than expected -- as did sales of business PCs in Europe.

Sales of notebook computers continue to grow at a faster clip than those of desktops, accounting for half of last quarter's growth but only about 28 per cent of total units.

There hasn't been an all-new mainstream version of Windows since XP debuted three years ago. Service Pack 2 brings some security enhancements but isn't seen as a strong motivator for new PC sales.

Microsoft did introduce a new version of Windows XP Media Center Edition, but that entertainment-oriented operating system is still a niche product, Smulders said.

"I think Media Center is a very small portion of the market and, in terms of pricing, is toward the high end," he said. "I don't think today it has mainstream appeal."

Microsoft has been doing some marketing this autumn trying to tout the value of Windows XP as a way to "experience more" with a PC. The company has been highlighting the Media Center PCs as well as new digital audio players and portable media centres.

But in its earnings report last month, Microsoft reiterated that it sees a slower growth rate for PC sales in the coming year, with sales to businesses increasing faster than those to consumers.