Home PC Market Predicted to Slow This Year, Then Shrink

SAN JOSE —  Growth of the U.S. market for home personal computers will slow abruptly this year and sales could even begin shrinking by 1998 as the market matures, research firm Dataquest said Monday.

The forecast of a rapid cooling of the market could be bad news for the PC industry and its suppliers, many of which are already reeling from slower PC sales during the recent Christmas shopping season.

In a new market research study, Dataquest said the growth of the U.S. market will be in single digits this year at only 8% compared with its explosive 42% growth rate in 1994 and a nearly 22% jump last year.

Dataquest expects about 33% of U.S. homes to own a PC by the end of the year--up from 29% in 1995--with home penetration advancing to 37.7% in 1999.

The number of new units shipped to homes in the United States may peak in 1997 at just below 8 million, then drift lower in 1998 before climbing to 8.4 million in 1999.

“This market just won’t support 20% growth anymore,” said Scott Miller, senior industry analyst of Dataquest’s Personal Computing program.

“It could get very ugly this year,” he said in an interview, adding that growth rates will be closer in coming years to the 6% to 7% annual industry growth rates experienced before the explosive growth of the last three years.

“With the maturing of the U.S. home market through the end of the decade, vendors must choose their battles carefully, and they must execute on existing opportunities with more targeted segmentation work,” he said.

While home PC sales have surged ahead in recent years, the breakneck growth has slowed recently, forcing makers of consumer PCs to focus on repeat customers or newly wealthy customers for further sales growth, the analyst said.

“The lucrative markets going forward are repeat customers and new, high-income buyers, in that order,” he said.

The greatest market penetration is among households earning more than $100,000 a year, where 65% own PCs.

The least-penetrated group is among households earning less than $30,000 a year, where 12% own PCs.

Miller said personal computer companies should target international markets, which still have low penetration. He also said that some computer makers may gain broader penetration with much cheaper, lower-margin consumer electronics products.

The report estimated the total installed base of personal computers in U.S. homes will number 47.4 million units this year, reaching 69.1 million by the end of the decade.

San Jose-based Dataquest is a market research and consulting firm providing global coverage of major sectors of the information technology industry for use by high-tech and financial communities.