IDC’s numbers too gloomy

The PC slump is more complex than IDC claims. 6/8 ReleVents hed: PCs numbers too gloomy dek: PC slump more complex than IDC claims. By James Mathewson

As a news story on our site today shows, 2001 will bring PC shipments down for the year for the first time since the product category has been measured by International Data Corp (IDC). This is an adjustment in IDC’s projection last year of a 2.2 increase for 2001.

Before I get into analyzing the causes of the reduction, a note on analyst firms such as IDC, Forrester Research, Gartner Group, et al. I usually adjust their projections downward by 30 percent if they’re made six months or more in the future. Why? Because these groups depend too heavily on raw data and not enough on the context of the data. Just take two years’ worth of data, put it on a graph, and draw a straight line from one to the other and up. What do you get? An inherently optimistic view of the market. Trust me. I’ve been following this numbers game for five years, and I’ve seen many more over-optimistic projections than accurate ones.

That said, IDC’s PC numbers from six months ago seemed realistic. And since they were based on lots of years of data and adjusted for a weakening market, my 30 percent rule seemed not to apply in this case. So I’m as surprised as anyone that IDC–no stranger to adjusting its numbers downward in the middle of the cycle (think ASPs)–has to adjust downward in the middle of this reporting period.

The cause did not come from the business sector, which is buying PCs about as fast as it did last year. No, consumers are to blame–reducing demand for new shipments by more than 17 percent this year.

IDC’s analyst blames it on an overall softening in consumer spending. But I think it’s more complex than that. According to the numbers I’m reading elsewhere, consumers are spending more than even the Fed expected. They’re just spending it on other devices–PDAs, digital cameras, and new accessories for their existing PCs.

Consumers will continue to spend faster than this economy would support under conventional rubrics, but just not on PCs–not yet anyway. They will purchase lots of other gadgets and will wait to commit to a new PC until Windows XP comes out (in October). Once it does, though, I expect stronger than normal PC shipments in the fourth quarter.

Perhaps my number-adjustment rule applies here in a different way. IDC sees a very serious drop in consumer PC spending and adjusts downward for the whole year based on the first five months’ worth of shipment data. Again, it takes the numbers a bit out of context and ignores one crucial fact: Windows XP–the first Windows OS with a compelling reason for all consumers to upgrade both OS and PC since Windows 95. Taking into account an expected spike in consumer PC shipments based on the need for bigger systems when XP comes out, consumer numbers should be flat to about a 2 percent growth rate for the year. Ironically, that’s pretty close to IDC’s pre-2001 projections for PC sales this year.

So what am I saying? Just ignore IDC’s new projections. It’s overreacting to a narrow data field.

James Mathewson is editorial director of ComputerUser magazine and ComputerUser.com.

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