The hopes in 2007 were that the upgrade cycle in PC’s was going to last in 2008 and into 2009 and beyond.  After all, only a fraction of PC’s in the U.S. and around the globe run on multi-core processors and most have insufficient RAM for continuous Web 2.0 applications.

According to a fresh survey conducted by ChangeWave, the PC sector is showing a decline in response to economic slowdown and drop in consumer spending.  If you are a technologist or believer in tech, the hope here is that people are still going to upgrade even if they don’t want to and even if they are feeling pain.

Here were some of ChangeWave’s findings:

• Only 8% of consumers surveyed reported an expected laptop purchase within the next quarter and only 6% of consumers plan to purchase a desktop PC.
• For corporations, only 73% surveyed plan to purchase laptops in the next quarter, compared to 77% last year. Only 70% of corporations plan to purchase a desktop this quarter, down by 5% from last year.

There are also some points on individual makers of PC’s and how they are tying into this as well. Apple (NASDAQ: APPL) remains the consumer leader with 31% and 28% of the laptop and desktop planned purchase markets, respectively. Apple corporate purchases are still sitting near record highs, although a smaller part of the corporate PC market compared to Dell at 7% for laptops and 6% for desktops.

The results of the survey painted a different picture for Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ). Both computer manufacturers are seeing consumer and corporate planned purchases drop compared to the previous survey in January for both laptops and desktops:

• Dell consumer laptop purchases and desktop purchases are down 2% and 4%, respectively, to 28% to 32%.  Dell corporate laptop and desktop purchases are also down, 3% and 1%, respectively, to 32% on each. 
• Hewlett-Packard consumer laptop and desktop purchases are down 5% and 2%, to 19% and 18%. Corporate laptops and desktops dropped 2 and 1% to 14% and 17%.

The market isn’t helping technology companies today, and this is just one data-point among many that probably isn’t giving tech traders any great feelings.  Dell shares are down 1.5% to $20.11 and Hewlett-Packard shares are down 2% to $47.23.  Apple is the standout here with its shares up almost 2.5% at $144.45.

We’ve already seen guidance in the last month out of Dell and H-P.  The PC-spending bulls will have to hope that either ChangeWave surveyed the wrong people or that people will have to upgrade their PC’s whether they want to spend the money or not.  If you use an older PC for steady Web 2.0 applications and for active use, then you may fit in that latter category like it or not.

Jon C. Ogg
March 26, 2008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at [email protected]; he does not own securities in the companies he covers.

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