Latest figures from Gartner's Dataquest show what the channel has known for months - PC sales plummeted in the fourth quarter last year, down 18 per cent over the previous period.
According to Gartner analyst Andy Woo, this is due to a general economic slowdown which saw many companies clamp down on their IT spending. Consumers also shied away from the usual Christmas splurge, despite competitive pricing from the major vendors.
"Simply put, pessimistic consumer sentiment resulted in a shift towards purchasing lower value items instead of PCs," Woo said.
According to the figures, smaller PC vendors and assemblers remain the hardest hit by the downturn, while larger companies such as Compaq, IBM and HP managed to increase their market share on 1999 figures for the quarter. Compaq led the PC vendors with 14.2 per cent of the market, despite the negative growth in the market. IBM remains the biggest winner with 12 per cent growth and 13.8 per cent market share, while HP also grew 5 per cent to take third place. By contrast, the market share of 'other' vendors dropped to 43.8 per cent, with negative growth of 19 per cent.
Gartner attributes the downturn to a number of factors - the weak and fluctuating Australian dollar, the lingering effects of the Olympics and a slowdown of the US market. Even rising petrol prices seemed to have taken their toll.
And as vendors are left with excess inventory, the industry will see further price cuts in the sector, Woo said.
The SME and home market remains the bright spot, driving positive growth for the next quarter, particularly in the Asia-Pacific (APAC) market place.
"The consumer penetration rate in APAC as a whole is very low - approximately 2 per cent - so there exists a lot of growth in countries such as China," said regional director and principal analyst at Gartner, Ian Bertram.
Meanwhile, server growth in Australia is expected to be flat, despite strong growth of more than 30 per cent across the Asia-Pacific region. Intel architecture grew 37 per cent in the Asia-Pacific, while the RISC-based server market experienced unit growth of 6 per cent. Again, Compaq, IBM and HP dominate the vendor list. However, Dell's market share increased 7 per cent on the corresponding 1999 quarter to take the fourth spot.