The outlook for the French PC market has been reduced to -0.7% for 2011, with sell-in levels expected to further decelerate in the second quarter, as distributors and retailers remain affected by high inventory amid continued sluggish demand in the consumer space. The market is expected to return to positive trends in the second half of 2011 thanks to favorable year-over-year comparisons, although the growth will not be as strong as previously forecasted.
PC shipments in France contracted by -13.6% in 1Q11, a much steeper decline than anticipated, following reduced sell-in levels associated with weak consumer demand and inventory build-up in the distribution and retail channels. While the deceleration was expected due to unfavorable year-over-year comparisons affecting the results because of very strong sell-in activities in 1Q10, the decline proved to be much stronger as very weak performance in the consumer space continuing since the Christmas period led to a sharper decrease of sell-in and prevented vendors from depleting inventory quickly.
Increasingly popular media tablets and smartphones were one of the key reasons for the lack of demand in the consumer business, as these new portable devices cannibalized households' budgets and contributed to the delay of PC renewals. Strong price competition and numerous offers in the consumer PC market did not lead to a permanent increase in demand, as old inventory remaining in the market proved unappealing to the majority of households. The Intel Sandy Bridge delay also contributed to this decline, as consumers decided to withhold their spending, waiting for the latest technology to become available in the marketplace.
The decline in the French PC market was partially compensated for by growth coming from the commercial space, which increased for the second quarter in a row, confirming improving economic conditions for business. The commercial PC market in France recorded a 9.2% increase in 1Q11, in line with IDC's expectations, with the enterprise segment being the key contributor to growth. Large companies continued to reinvest in IT infrastructure after years of withholding their budget spend, as the economy is slowly returning to positive trends.
Small and medium businesses were still affected by adverse conditions, with smaller companies suffering the most, and although the SMB segment as a whole also returned to growth, the increase was more gradual, at 4.2% year over year.
Vendor Highlights
Despite posting a 7.1% decline overall, HP strengthened its leadership position thanks to very good performance and impressive 48.6% growth in the commercial segment. The vendor capitalized on an aggressive pricing strategy and outperformed competition thanks to numerous promotions targeting business clients.
Acer remained in second place but continued to lose market share, contracting 25.5%. The vendor was severely affected by persistent high inventory levels as well as weak demand in the consumer space.
Asus moved into third place, overtaking Dell and benefiting from weak performance of its main competitors. Although its shipments declined, the vendor performed better than the market overall thanks to a healthy stock situation and efficient inventory management.
Dell dropped to fourth place, and although it maintained second position in the commercial segment, the vendor declined 45.7% in the consumer space due to weak demand.
Although Samsung recorded a decline due to softness in the consumer market, the vendor climbed to fifth position in the overall PC market and continued to gain share in consumer portable space.
IDC expects the French PC market trends to remain negative in 2Q, as demand in the consumer space continues to be slow, affected by the growing popularity of media tablets and smartphones. The market will reach a year-over-year increase in the second half of 2011, caused largely by favorable comparison with 3Q and 4Q of 2010; however, this growth will be smaller than previously expected.
"Media tablets will continue to have an impact on household spending patterns and will remain the key factor contributing to the PC market decline. IDC predicts that the consumer market will return to growth in the second half of the year; however, this will happen mainly due to favorable year-over-year comparisons rather than real recovery, and the growth is expected to be somewhat softer than previously anticipated. Tablets will play a big part especially during the Christmas period," said Maciej Gornicki, research analyst in IDC's EMEA Personal Computing Group.
Downwards adjustment of the forecast for 2011 comes also as a result of the earthquake that struck Japan in March 2011 and affected production of key PC and tablet components. Most of the industry players do not expect the impact to be significant, as demand for PCs remains soft. Nevertheless, it is still too early to quantify the real implications.
"Although PC components may not be directly affected, many parts for media tablets are being manufactured exclusively in Japan. With demand for tablets rising quickly, we do expect some kind of constraints to appear that may have an effect on the prices of these devices. IDC previously expected tablet prices to drop quite quickly, but in the current situation they may remain high until at least the end of the year, leading to longer lasting budget cannibalization and PC renewals postponement in the consumer space. This will surely translate into a drop in demand on the PC market," said Gornicki.
The commercial market is expected to maintain growth throughout the year, with more investments and Windows 7 rollouts driving expansion in the enterprise space, especially in 3Q and 4Q. After initial softness, small and medium businesses are also likely to return to double-digit growth in the second half of 2011. IDC expects government spend to remain restricted due to austerity measures being introduced to tackle economic issues in the country, although upcoming presidential elections may lead to unforeseen increases in investments and boost the commercial market slightly. This part of the market will also be enhanced by growth in the education sector, which is traditionally very strong in 3Q.
PC shipments in France contracted by -13.6% in 1Q11, a much steeper decline than anticipated, following reduced sell-in levels associated with weak consumer demand and inventory build-up in the distribution and retail channels. While the deceleration was expected due to unfavorable year-over-year comparisons affecting the results because of very strong sell-in activities in 1Q10, the decline proved to be much stronger as very weak performance in the consumer space continuing since the Christmas period led to a sharper decrease of sell-in and prevented vendors from depleting inventory quickly.
Increasingly popular media tablets and smartphones were one of the key reasons for the lack of demand in the consumer business, as these new portable devices cannibalized households' budgets and contributed to the delay of PC renewals. Strong price competition and numerous offers in the consumer PC market did not lead to a permanent increase in demand, as old inventory remaining in the market proved unappealing to the majority of households. The Intel Sandy Bridge delay also contributed to this decline, as consumers decided to withhold their spending, waiting for the latest technology to become available in the marketplace.
The decline in the French PC market was partially compensated for by growth coming from the commercial space, which increased for the second quarter in a row, confirming improving economic conditions for business. The commercial PC market in France recorded a 9.2% increase in 1Q11, in line with IDC's expectations, with the enterprise segment being the key contributor to growth. Large companies continued to reinvest in IT infrastructure after years of withholding their budget spend, as the economy is slowly returning to positive trends.
Small and medium businesses were still affected by adverse conditions, with smaller companies suffering the most, and although the SMB segment as a whole also returned to growth, the increase was more gradual, at 4.2% year over year.
Vendor Highlights
Despite posting a 7.1% decline overall, HP strengthened its leadership position thanks to very good performance and impressive 48.6% growth in the commercial segment. The vendor capitalized on an aggressive pricing strategy and outperformed competition thanks to numerous promotions targeting business clients.
Acer remained in second place but continued to lose market share, contracting 25.5%. The vendor was severely affected by persistent high inventory levels as well as weak demand in the consumer space.
Asus moved into third place, overtaking Dell and benefiting from weak performance of its main competitors. Although its shipments declined, the vendor performed better than the market overall thanks to a healthy stock situation and efficient inventory management.
Dell dropped to fourth place, and although it maintained second position in the commercial segment, the vendor declined 45.7% in the consumer space due to weak demand.
Although Samsung recorded a decline due to softness in the consumer market, the vendor climbed to fifth position in the overall PC market and continued to gain share in consumer portable space.
IDC expects the French PC market trends to remain negative in 2Q, as demand in the consumer space continues to be slow, affected by the growing popularity of media tablets and smartphones. The market will reach a year-over-year increase in the second half of 2011, caused largely by favorable comparison with 3Q and 4Q of 2010; however, this growth will be smaller than previously expected.
"Media tablets will continue to have an impact on household spending patterns and will remain the key factor contributing to the PC market decline. IDC predicts that the consumer market will return to growth in the second half of the year; however, this will happen mainly due to favorable year-over-year comparisons rather than real recovery, and the growth is expected to be somewhat softer than previously anticipated. Tablets will play a big part especially during the Christmas period," said Maciej Gornicki, research analyst in IDC's EMEA Personal Computing Group.
Downwards adjustment of the forecast for 2011 comes also as a result of the earthquake that struck Japan in March 2011 and affected production of key PC and tablet components. Most of the industry players do not expect the impact to be significant, as demand for PCs remains soft. Nevertheless, it is still too early to quantify the real implications.
"Although PC components may not be directly affected, many parts for media tablets are being manufactured exclusively in Japan. With demand for tablets rising quickly, we do expect some kind of constraints to appear that may have an effect on the prices of these devices. IDC previously expected tablet prices to drop quite quickly, but in the current situation they may remain high until at least the end of the year, leading to longer lasting budget cannibalization and PC renewals postponement in the consumer space. This will surely translate into a drop in demand on the PC market," said Gornicki.
The commercial market is expected to maintain growth throughout the year, with more investments and Windows 7 rollouts driving expansion in the enterprise space, especially in 3Q and 4Q. After initial softness, small and medium businesses are also likely to return to double-digit growth in the second half of 2011. IDC expects government spend to remain restricted due to austerity measures being introduced to tackle economic issues in the country, although upcoming presidential elections may lead to unforeseen increases in investments and boost the commercial market slightly. This part of the market will also be enhanced by growth in the education sector, which is traditionally very strong in 3Q.
