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The PC sector is in recession as PC shipments around the globe continue to plummet for two consecutive quarters, analysts say, adding that a recovery appears unlikely in the months ahead.

PC shipments worldwide in the third quarter this year fell by between 12 and 14 percent compared to the same quarter a year ago, according to analysts at Gartner and IDC.

Gartner blames the September terrorist attacks on the U.S. for exacerbating problems in an already weakened U.S. economy.

In the U.S., third-quarter shipments slipped by 21 percent year-on-year, IDC says. However, the events over the last month will only have short-term effects, according to Kitty Fok, Hong Kong-based director of Personal Systems at IDC. "We were noticing that things were picking up in August, but then September 11 happened, and that brought things tumbling down," she says.

Reduced Demand

Although demand for PCs in the U.S. did escalate shortly after the terror attacks in U.S. because companies located in and around the affected buildings were replacing systems that had been destroyed, raw material shortages and transportation problems resulted in failure to deliver the units, Fok says.

The third quarter usually sees an increase in U.S. shipments due to seasonal factors, such as back-to-school consumer buying, but this trend was not reflected this year, IDC says. Sequential growth in the U.S. from the second quarter to the third quarter was a mere 1.7 percent, compared to over 14 percent growth recorded historically, IDC research shows.

Saturation in the PC market also lead to fewer PC units being shipped. In the current market, PC shipment levels are more dependent on PC replacements than shipments to new buyers because there are relatively few new buyers available, Gartner says, adding that as consumer confidence fell, so did PC replacements.

Market Conditions

The merger of Hewlett-Packard and Compaq Computer, companies in receivership, typhoons in Taiwan, and global political uncertainties were other factors that affected consumer and commercial confidence, driving PC sales down, IDC reports.

Compaq suffered a particularly tough quarter, with Gartner reporting its U.S. shipments dropped by 43 percent, and IDC reporting a 51 percent drop.

HP also saw shipments drop in the last quarter due to its dependency on the U.S. home market, which was fairing poorly, Gartner reports.

Dell was the only international PC vendor to show positive growth in the third quarter, with over 5 percent growth in the U.S. year on year, and over 10 percent worldwide, IDC and Gartner report. However, although Dell's global shipments showed signs of increase in the last quarter, growth rates are lower than the strong double-digit growth in previous years, Gartner says.

Around the World

According to the Gartner report, the Asia-Pacific PC market grew by 8 percent over the same quarter last year, and 5 percent over the previous quarter.

Shipments in Japan weakened drastically, reported the analysts. Domestic economic difficulties have been compounded by the slowdown in the U.S. economy and corporate and home markets are suffering as a result, tumbling 17 percent according to Gartner.

Figures for Europe, the Middle East, and Africa show a 10 percent slump in shipments in the third quarter, compared to the same quarter last year--the second time the region has fallen by double digits in two quarters, says Gartner.

Latin America's PC shipments, which have been declining steadily since early this year because of the effect of the decelerating U.S. economy, saw a further 3 percent drop in the third quarter, Gartner reports.

Looking ahead, companies whose fiscal year ends in December or March will continue to spend, but this may change in the following year when budgets are cut, Fok says. "The worst may be yet to come," she says.

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