Price war may be looming for personal computer business

Personal computer manufacturers are gearing up for a price war as the market faces saturation.

Market research company Dataquest says the economic slowdown in the US has shaken the computer industry.

It believes worldwide shipment of PCs will grow by nearly 11% this year as manufacturers cut prices to boost sales.

Martin Reynolds, Dataquest's vice-president, predicts that Dell and Gateway will try to gain market share from Compaq, Hewlett-Packard and IBM.

Dataquest suggests that price cuts will make other parts of the world buy more PCs. It says worldwide shipments, excluding PC servers, are expected to total 144.5m in 2001, an increase of 10.7% over last year.

George Shiffler, the company's PC forecast co-ordinator says: "The PC industry suffered a nasty surprise in the fourth quarter of 2000 on account of the dramatic turn in the US economy.

"We're concerned that circumstances in the United States still appear to be deteriorating and that the US slowdown looks to be spreading to the rest of the world."

Dataquest fears that if the US suffers a full-blown recession, the growth in PC shipments could slow down to single figures.

Analysts from the market research company do not see market conditions improving until 2002. But even then, the industry faces some problems as the US PC market is nearly saturated, and Canada and Western Europe are not that far behind.

Dataquest says the solution may be to convince users that they need to replace their PC more frequently. If this doesn't happen, it believes the computer industry faces testing times.