23 August 2005 The price of PCs will plummet over the coming years according to analyst group Gartner amid fierce competition in an over-crowded market.

A recent report from Gartner predicts that desktop prices are likely to fall by 13.5% in 2005, and a further 10.8% in 2006.

If Gartner is right, a PC that cost £500 at the start of 2005, will retail at around £385 by the end of 2006.

The falling desktop price reflects similar drops in the price of laptop PCs and the intense competition in the market.

“So long as there are buyers to be wooed with low-cost machines or at least one major vendor [is] willing and able to trade smaller margins for increased volume, ASPs (average selling prices) will remain under strong downward pressure,” said George Shiffler, principle analyst for Gartner.

Gartner predicts prices will continue to fall until several additional vendors are forced to exit the market – IBM, once the dominant vendor in the PC market, sold its PC manufacturing business to Chinese vendor Lenovo in 2004, after years of underperformance.

But despite the dropping prices, Gartner predicts that revenue from sales will remain steady, falling just 0.5% in 2005 and 0.4% in 2006.

This indicates Gartner expects demand for PCs to remain despite a proliferation of alternative devices.

According to by analyst group IDC, thin client sales are being spurred a “cost-conscious user community” and together with falling prices and increased network bandwidth, thin client will penetrate 9% of the world’s desktops by 2008.

Furthermore, blade PC systems – which like thin clients leave users with only a network connection box, keyboard and screen – threaten to increase pressure on PC prices. Blade PCs allow software to be relocated from the desktop to the data centre, providing higher security and easier management of resources.