PCs: Microsoft leans on new XP, but the share battle is in hardware

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Growth in the maturing personal computer category has slowed to a crawl and industry consolidation, which eliminated such retail brands as Packard-Bell/NEC and Acer, is likely to rid the market of more. Likewise, Hewlett-Packard Co.'s proposed acquisition of Compaq Computer Corp. and Gateway's retrenchment and widespread layoffs point to an industry in deep transition.

Microsoft Corp. is counting on the Oct. 25 release of Windows XP, the company's next-generation PC operating system, to help spur PC sales, but industry analysts aren't so sure. In fact, the feature-rich upgrade is unlikely to lure the masses to upgrade to a new PC since the one or, in some cases, ones they already use work well.

The desktop PC segment is hurting the most, while notebook PCs sales and other form factors remain strong, although prices are falling throughout the category. Marketers that deliver streamlined, easy-to-use solutions will fare the best in the stagnating economy. One-size-fits-all computers, loaded with all sorts of software and functions that remain unused, are not the answer.

Dell Computer Corp., kingpin of the category, set off a price war in early 2001 to gain market share. It did, but is looking, like all tech marketers, to decrease its dependence on hardware and to focus on "beyond-the-box" services (leasing, consulting and integration). IBM Corp. may drop from the world's No. 1 to No. 2 computer company if the HP/Compaq merger is approved. IBM, which led the charge into services, will continue to gobble up share across the board. As PC marketers look to services and alternative revenue streams, there are sure to be fewer players.

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