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Forrester says PC market will stall after 2000

October 30, 1998
Web posted at: 2:40 PM EDT

by Nancy Weil

BOSTON (IDG) -- A spending surge will boost PC sales next year as companies replace old equipment that could fail due to the Year 2000 bug, but after that the market will slow and then stall, halting 17 years of industry growth and leading to lower PC prices, according to Forrester Research.

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A new study by the market researcher indicates that corporate spending on PCs will decline after companies replace aged machines and will remain stagnant through 2002. PC vendors will drop prices to try to spur demand, but corporations will increasingly go the route of Internet appliances, further dampening the market for personal computers.

Companies trying to replace desktop machines before 2000 will push PC revenues to $55 billion next year, but that demand will die out by the end of next year, causing a drop in PC buying for the first time in a decade, Forrester predicted. That decrease coupled with slow global sales will lead to slashed PC prices, further dropping revenue, which Forrester expects to slide to $47 billion in 2000.

Forrester interviewed 50 Fortune 1000 companies to gauge PC buying requirements and budgets for the report, "PC Industry Roller Coaster." Those queried said that they expect to spend more on PC purchases to cope with Year 2000 issues, but 80 percent said they anticipate stagnant or lower PC budgets in the first years of the new millennium.

The Year 2000 bug is caused by old software code written with two-digit date fields that may read the "00" in 2000 as "1900" and therefore fail to make correct calculations. Rather than tracking and fixing the code, some corporations are buying new Year 2000-compliant hardware and software.

But after the crisis abates, the PC industry will be pushed by new demands. Instead of investing in PCs, corporations increasingly will expend application development money and energy to support Internet browsers and appliances, Forrester said.

The research revealed that focus on the Internet will lead companies to replace PCs with less costly options, which will keep the PC market from ever again achieving sales like those expected next year.

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