Desktop PCs - UK - February 2005

SUMMARY

"Mintels latest review of the sector in 2003 confirms the maturity of the market withprices continuing to be under pressure and manufacturers and retailers increasingly looking at waysof enhancing the package of offerings that come with a desktop PC.

With tumbling prices, and growing competition from laptops, manufacturers and retailers have beenlooking at other ways of adding value. This has partly come from tapping into growing consumerdemand for more versatility from their PCs with multimedia applications leading the way.

There is evidence from Mintels exclusive research for this report that the ownership of laptopsis growing faster than desktop PCs that are now considered as a mature market.

Turning to the wider market, there is growing evidence of consolidation taking place with a smallnumber of manufacturers dominating the sector. "

About Mintels report...

Using the latest consumer research, market size data and trend analysis, Mintels report offersyou vital new insight into the current state of the market, its prospects and the attitudes of keytarget audiences. You can use Mintels market research to:

- Build consumer-focused marketing strategies to maximise sales throughout desktop PCs sectors

- Discover new ways of tempting key target groups towards high-price points.

- Measure market sizes and assess the scope for new player and product entrants

- Create realistic sales strategies based on market forecasts and insight into market drivers.

Intriguing findings include... --

In 2004, the top six brands account for 55% of the desktop PC market --

Advertising investment on desktop PCs dropped by 39% between 1999 and 2003 --

Desktop PC online sales account for 33% of the retail market in 2004.

TABLE OF CONTENTS

Introduction and Abbreviations

• Definitions
• Consumer research
• ACORN
• Advertising data

Abbreviations

Executive Summary

• Manufacturer efforts continue to maintain interest in the market
• Falling prices play major part in sales growth
• Major brands continue to show strong progress
• Advertising budgets remain under pressure
• Online sales show strong growth
• High level of PC penetration combines with growing multimedia interest
• Increased competition from laptops

Market Drivers

• Competition between manufacturers and retailers
• Technical developments
• PDI continues to prove an important driver...
• Figure 1: Trends in PDI and consumer expenditure, at constant 1999 prices, 1999-2008
• ...although rise in laptop PC ownership presents problems
• Figure 2: Have you got a PC at home?, 1999-2004
• A market reaching maturity?
• Figure 3: When PC was obtained, 1999-2004
• Changes in working patterns
• Figure 4: Trends in working from home, by gender, age and socio-economic group, 1999-2004
• Age profile of consumers
• Figure 5: Trends in total UK population, by age group, 1999 and 2004
• Socio-economic groups
• Figure 6: Trends in total UK population, by socio-economic group, 1999 and 2004
• Internet access and usage
• Figure 7: Internet usage at home, 2000-04
• Broadband
• Figure 8: Broadband Internet connection, 2003 and 2004
• Market remains buoyant as interest in desktop PCs continues
• Figure 9: Estimated UK retail sales of desktop PCs, by volume and value, 1999-2004
• Volume sales surge ahead post-11 September...
• ...although competition depresses market value
• Figure 10: Index of UK desktop PC volume and value sales, 1999-2004
• Enhanced PC specification maintains interest...
• ...with possible interest in desktop PCs as consumable replacement
• Laptops - the Trojan Horse
• Bundles lose ground as discounting takes hold
• Figure 11: Estimated UK retail sales of desktop PCs, by type and value, 2002 and 2004

Market Segmentation

• Processors - Intel is dominant
• Figure 12: UK retail volume sales of desktop PCs, by processor type, 2002 and 2004
• Intel maintains leadership
• Reduced profile for speed may open up new opportunities
• DVD copiers are becoming standard equipment
• Figure 13: UK retail volume sales of desktop PCs, by multimedia feature, 2002 and 2004

The Supply Structure

• Consolidation continues reflecting market maturity
• Figure 14: Estimated manufacturer shares in the UK desktop PC market, by volume, 2002 and 2004

Companies and brands

• Packard Bell
• Dell
• Time Computers
• Hewlett-Packard
• Fujitsu Siemens Computers
• Apple
• Others
• New entrants
• Efforts to improve design continue

Advertising and Promotion

• Expenditure increasingly directed towards specific promotions
• Figure 15: Main monitored media advertising expenditure on personal/desktop PCs, 1999-2004
• Figure 16: Main monitored media advertising expenditure on personal/desktop PCs, 1999-2004
• Consolidation within market is growing
• Press and TV campaigns both important

Distribution

• Growth of the Internet continues...
• ...at the expense of traditional channels...
• ...although major multiple chains continue to perform well
• Figure 17: Estimated retailer value shares for UK total* home PC market, 2002 and 2004
• Dixons Stores Group
• Comet
• Time Group
• Dell
• Other retailers
• Other direct-sales companies

The Consumer - Usage and Ownership Patterns

Presence of PCs in the home

• Figure 18: Penetration of home office equipment and furniture, 2000-04
• PC penetration within the home increases
• Growth of laptops while desktops mature
• The age of the PC
• Strong laptop presence among ABC1s
• Older children a major factor for desktop PCs and broadband
• Families important for desktop PCs while pre-/no families for laptops
• Large households important for PC ownership
• North/South divide
• Significant opportunities for retailers
• Morrisons and Safeway

Detailed demographics - computer ownership

• Figure 19: Computer-based equipment in the home, by gender, age and socio-economic group,November 2004
• Figure 20: Computer-based equipment in the home, by presence of children, lifestage and MintelsSpecial Groups, November 2004
• Figure 21: Computer-based equipment in the home, by marital and working status and householdsize, November 2004
• Figure 22: Computer-based equipment in the home, by region and ACORN categories, November 2004
• Figure 23: Computer-based equipment in the home, by media usage, commercial TV viewing andsupermarket usage, November 2004

Features sought when purchasing a PC

• Figure 24: Features likely to be sought when next purchasing a desktop PC, 2002 and 2004
• Speed, memory and price remain the key three features
• Interest in multimedia features is high
• Market maturity brings changing demands from end-users

Impact of ownership on features sought

• Figure 25: Features likely to be sought when next purchasing a desktop PC, by PC ownership,November 2004

The Future

• Saturation of the market increasingly likely
• Improving specification will benefit laptops
• Desktop PCs as home multimedia centres
• Boosted by expected technical and software developments
• Consolidation will favour large manufacturers and smaller specialists
• Retail sector will increasingly become consumer-led
• New approach to communicating with consumers likely

Forecast

• Continuing market success dependent on desktop PCs finding a niche
• Growth set to slow
• Figure 45: Forecast of the UK market for desktop PCs, by value, 2004-09
• Rise in laptops will stymie market
• Values should improve if multi-functional desktop PCs gain acceptance
• Figure 46: Forecast of the UK market for desktop PCs, by volume, 2004-09
• Market maturity will see volume sales flatten
• Figure 47: Index of volume and value desktop PC sales, 2004-09
• Factors Incorporated