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Firm predicts slump for computer makers

/ Source: The Associated Press

Slower growth and reduced profits will likely squeeze three of the nation's top 10 personal computer manufacturers out of the market by 2007, a research firm predicted Monday.

While manufacturers' shipments increased by double digits in the past few years, tougher times lie ahead, according to Gartner Inc.

Gartner did not name any candidates for departure but suggested many are vulnerable. Dell is the only consistently profitable global computer vendor in the past several years, Gartner said.

The top 10 worldwide vendors, by units shipped, are Dell, Hewlett-Packard Co., International Business Machines Corp., Fujitsu Ltd., Fujitsu Siemens Computers, Toshiba Corp., NEC Corp., Apple Computer Inc., Lenovo Group Ltd. and Gateway Inc.

Personal computer growth, by unit, is forecast to average 5.7 percent annually from 2006 through 2008, according to Gartner, half the 11.3 percent average of 2003 through 2005.

"With PC replacements still in full swing, 2005 should be a reasonably strong year for PC vendors," said Leslie Fiering, a research vice president with Gartner. "However, the end of the replacement cycle is likely to strain viability for even the largest PC vendors in 2006 and beyond."

The personal computer divisions of Hewlett-Packard and IBM are vulnerable to being spun off if their drag on margins and profitability are deemed too great by their parent companies, Gartner said.

Hewlett-Packard and IBM did not return calls seeking comment.

Customers will find lower prices as competition intensifies, Gartner analysts said. But they should also consider vendors' staying power, analysts said.

The growing prominence of emerging markets could open opportunities for local vendors in those regions to pursue global markets.

Local vendors, such as China's Lenovo, appear positioned to leverage their strong local-market standing and low operating costs into a global presence by acquiring local rivals, Fiering said.