NPD Group Blog » What’s Old Is New Again!!!

What’s Old Is New Again!!!

Tuesday, March 16th, 2010
By Stephen Baker, Vice President, Industry Analysis

Just when you thought, after years and years of decline, it was safe to give up on the desktop it has roared back with a vengeance. Revenue has been positive for five consecutive months as of February 2010, and that is the result of improvements across the board. Windows 7 is propelling the PC side of the market where desktop ASPs have been higher than notebook/netbook ASPs in three of the last four months. We are seeing even more stunning growth numbers from the iMac in what had been generally accepted at this time last year as a fading product line.

So here comes the desktop, the new growth platform!!! A platform which probably can’t come soon enough for the Windows market where plummeting ASPs on notebooks have threatened to knock out huge chunks of revenue with little hope for replacement. The resurgent desktop market is great news for the OEMs, especially Dell and HP, as at least some of the rebirth is the result of consumer’s need for more powerful, more capable family PCs. And since a higher proportion than in prior years is going to come from higher value configure-to-order web offerings those two brands are likely to benefit. It can’t come soon enough for retailers either. The erosion in retail ASP has stopped, and in three of the four months since Windows 7 launched desktop ASPs have been higher than notebook. Retailers too depend on the desktop for the wide variety of add-ons and accessory sales that follow along. According to NPD’s What’s in the Computer Market Basket Survey (fielded last in 2008 and scheduled to be repeated this spring), the average desktop sale above $750 was more likely to see add-on purchases than a comparable notebook, and the average desktop sale generated substantially morel additional revenue beyond the initial desktop purchase compared to the notebook.

Desktop revenue growth and ASP stability also have the notebook market to thank. In years past the entry-level PC market was always the under $400 (and lower) desktop market popularized by eMachines way back in 1999 in conjunction with the AOL ISP rebate programs of the day. Fast forward to today and we find that notebooks have become the new first-time buyer entry-level product. With consistent offerings under $400, partly in response to the netbook challenge and partly in response to competitive activity in the industry, notebooks now make up the lion’s share (64 percent of the non-netbook under $400 PC market in the six months ending Feb 2010 and one-third of the 4.4 million computers sold at retail for less then $400 in that time, according to NPD’s Retail Tracking Service). In fact, in February notebooks under $400 nearly outsold netbooks.

The strength in Windows desktops is also related to the strength of Windows 7. In NPD’s 2009 Household Penetration Study (being repeated again this spring) we found that 56 percent of Windows notebooks had the Windows XP operating system but 71 percent of desktops had Vista installed. Given the strong message of connectivity that Microsoft has promoted it is not a surprise to see these ageing Windows XP desktops beginning to be replaced. Finally, while the data is still unclear it seems likely that the inclusion of Windows Media Center and streaming capabilities in the Windows 7 desktop, combined with the high level of attention that that feature has received in recent months may be prompting more consumers to think about the benefits of using the desktop as a set-top box device.

All-in-all it is clear that the Windows desktop market, as well as the Mac market, have been reinvigorated by the last iMac refresh and the Windows 7 release respectively. With solid ASPs, better demand, and a strong upgrade path we believe that 2010 is likely to see the best growth rates for consumer desktops in years.

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