predicting the weather, near-term prognostications are likely to be boringly correct, and farther-out
projections are likely to be just plain wrong. But it seems to be a requirement of the trade that we
make these judgments anyway, if for no other reason than to give those of our critics who keep
track something with which to torment us later on.
So, here are mine:
Ending Recovery in the United States
The U.S. recovery will finally turn around and start south sometime in the late first or early second
half of the year. Signs of this development are already apparent in the real estate market (due in
no small part to rising interest rates) and the bond market (which is beginning to display yield
inversions). Rising interest rates in themselves will help choke off business investment, despite
the amount of cash washing around looking for good home.
The reason this development matters, other than the obvious, is that history has shown that PC
shipments correlate more closely with overall economic performance than any other variable.
Thus, if the economy heads downward, PC shipments will slow, dragging down the entire tech
sector.
Although the rest of the world is in somewhat better shape (my sources in Taiwan indicate
healthy climates in China and other Asia), a U.S. slowdown will eventually drag other economies
down, as has occurred in the past. Western Europe's economy remains delicate and could
easily join in any meltdown this side of the Atlantic. It may take a year for the effect to ripple
through world markets.
As a result, I expect U.S. 2006 unit PC shipments to increase in only the mid-single-digits over
2005 figures. As price declines continue and unit volume shifts to the lower price bands, I expect
revenue derived from 2006 shipments to rise barely, if at all.
Doom and gloom dispensed with, here are some more specific technology predictions:
WWANs for PCs will Begin a March to Prominence
Wireless Wide Area Networks (WWANs), better known as cell networks, are coming to PCs in a
big way. Already on the market in 2005 were Sony and Lenovo, Sony with a 2G and Lenovo with a
3G offering. At CES, several more large companies will announce similar products with rollouts
expected in 2Q06. The major firms are likely to expand their offerings across more lines as the
year wears on.
More than supplier-push, adoption of these systems will be driven by the great interest of end
users. Not since the introduction of the flat panel monitor has a technology generated so great a
positive emotional response. People really like the idea of being able to get on the Internet
independently; that is, without having to beg a connection from their hosts when on the road.
There are roadblocks that will slow adoption of this technology, particularly price and flexibility, but
awareness will rise during the year and adoption will follow apace.
Blackberries will have More Competition
Research in Motion's legal problems will have a lasting long-term effect in that users have
become aware of the vulnerability of single-source supply and have begun to examine — and in
some cases turn to — alternatives.
With Microsoft and others gunning for the high-value mobile email market, competition is likely to
intensify with a concomitant pricing benefit to end users.
Global Positioning Systems (GPS) will Begin to go Mainstream
An increasing number of GPS modules are being built into various devices. No one seems yet to
have the holy grail in terms of which combination is right, and there may not be any such
combination, but the elements include portable entertainment, gaming, navigation, and cell
phone capabilities. The "right" combination could be simply a matter of preference. But with the
advent of location-specific services, GPS capabilities are likely to turn up in more and more
devices. Google, with a healthy database of geographic service data already in place, is likely to
be a major player in this new market.
Small Video Players and Related Services will gain Traction
Portable Media Players (PMPs) and Video iPods will lead a new generation of devices that offer
entertainment on the go. While us old fogies are unlikely targets for these players, younger
people already used to Gameboys and similar small systems that occupy the eyes, ears, and
hands simultaneously represent a ready market for such toys.
A corollary to the rise of video devices will be a related growth in the availability of entertainment
content. Hollywood will begin, slowly at first and then with increasing fervor, to release more
premium content for users who want to download it and enjoy it on their own schedules.
In-car Gaming and Entertainment Systems will Expand
Telematics have only begun to penetrate the market, but given how much time people spend in
their cars and how desperate auto makers are to find ways to attract customers from their
competitors, I expect to see an increasing number of rear-seat video players and gaming
systems built into new vehicles, along with navigation systems for the driver based on GPS.
One More Major PC Market Merger Will Occur
Given the bitter economics of the PC industry, I expect at least one more merger as another top-
ten company throws in the towel. Likely sellers include midsize companies with narrow focus (e.
g., covering only limited geographies, segments, or channels). Likely buyers include large
component suppliers looking to move downstream into distribution to raise their brand profiles.
There, I've thrown enough mud on the wall so that there's at least a chance some of it will stick.
I'll check in next year to see how I did.
