Notebooks gaining ground, but desktops not dead -- yet

For the first time, notebooks are expected to outship desktops in August, but PC vendors are still committed to evolving the desktop.

Notebook PC shipments are set to exceed desktop PC shipments in upcoming months in the US, but vendors continue to make the desktops a major part of their product lineups heading into one of the prime seasons for PC purchases, a market researcher is predicting.

Those plans were evident this week, as Dell, Hewlett-Packard (HP), and Gateway all unveiled new desktops for home and office customers that use relatively new technologies such as dual-core processors from Intel and Advanced Micro Devices (AMD) and the BTX (balanced technology extended) chassis design.

The long-awaited PC replacement cycle that fueled sales the last few years has been marked by a surge in notebook shipments as a percentage of the overall market. Many home and business users have chosen to replace their older pre-Y2K desktops with notebooks that have greatly caught up to their bigger cousins in terms of performance.

In fact, PC vendors will probably ship more notebooks than desktops in the US during August and September, the so-called back-to-school shopping season, said Stephen Baker, director of industry analysis at NPD Techworld in Virginia. That would be the first month in which notebook shipments exceed desktop shipments in the US, he said.

In mature PC markets in countries like the US, Japan, the U.K. and Germany, households looking to add a second or third PC are driving notebook sales, Baker said. Many users still want to have a high-performance desktop as the linchpin of their PC arsenal, but it often makes more sense to add notebooks as additional PCs with the growth of technologies like wireless networking and the performance gains of modern notebooks, he said.

As a result, desktop vendors have been forced to evolve, and are attempting to use a number of different marketing strategies to reach the public and corporate purchasing managers. Desktops are popular with retail stores because they produce a greater amount of revenue after the sale, such as accessories, upgraded components and peripherals like printers or monitors, Baker said.

When it comes to home users, bigger is not necessarily better these days with desktops, as evidenced by Dell's new Dimension 5100C. Designed as a home multimedia PC, the 5100C is 12 inches tall and less than four inches wide (30.5 centimeters by 10.2 cm), the company said in a press release.

In order to get Intel's Pentium 4 500 series and its dual-core Pentium D 800 series chips into such a small PC, Dell implemented the BTX chassis design in the 5100C. The BTX design improves the flow of cool air over a hot processor by moving some of the internal components of a desktop to create a wind tunnel of sorts, with two cooling fans instead of the one used on older designs.

Gateway also used the BTX design on all of the new desktops it unveiled this week for its retail and business customers. The company is also betting heavily on the evolution of desktops in home entertainment centers with its newest lineup of PCs for the retail market, Baker said.

All of Gateway's new retail desktops feature Microsoft's Windows XP Media Center Edition operating system. This operating system allows users to watch and record television programs on a PC, organize their photo libraries and edit home videos. Gateway is releasing three new retail PCs at prices ranging from US$699 to US$1,049.

HP also got in on the action with new consumer desktops that feature dual-core processors from both Intel and AMD. Like Gateway, HP is making Windows XP Media Center Edition the default operating system on several new Pavilion models, bringing the cost of a Media Center PC down to US$649 after mail-in rebates, HP said. The new PCs also feature Google's Toolbar application integrated with Microsoft's Internet Explorer browser.

The new desktops introduced by the three vendors this week will also be available during the fourth quarter, when desktops are expected to regain the shipment lead, Baker said. Desktop shipments have traditionally been brisk during the holiday season because of their lower prices, he said.

Desktop shipments are still also very strong in emerging economies with low rates of PC adoption, Baker said.

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