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Hasta la Vista Baby! say PC makers

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CIOL Bureau
New Update

Sheena Lee

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TAIPEI: After all the hype surrounding its January launch, Microsoft's new Vista operating system has yet to brighten the outlook for PC makers and could even lead to oversupplies for those who had built up inventory.

Top PC makers, such as Dell, Hewlett-Packard and Lenovo, may now have to resort to sales of lower-margin computers in emerging markets such as China, Eastern Europe and Latin America for their growth this year.

Featuring high-definition video and audio functions and three-dimensional graphics, Vista is being billed as a major upgrade of its predecessor, Windows XP.

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But the software, which runs on more memory and superior graphic cards, has not taken off as fast as some had hoped, leading to concerns of potential inventory woes for makers of those products, analysts and industry players said.

"Vista has had no big help," said Acer's President Gianfranco Lanci, adding that PC makers are really not counting on Vista to drive high demands for the industry.

Samsung Electronics, the world's top memory chip maker, also said that demand for DRAM computer memory chips from Vista hasn't materialised as fast as it had predicted.

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"We had expected the 'Vista impact' on DRAM around April, but now we see it being delayed into the second half," said Hwang Chang-gyu, semiconductor business president of Samsung Electronics.

But many PC vendors were already skeptical on fresh demand from Vista even before the product's launch in January, better preparing them for a potential disappointment, said JP Morgan analyst Charles Guo.

Major PC players like Asustek Computer Inc., also the world's top motherboard maker, said Vista might have warmed up the market but significant results have not been seen.

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"We aren't seeing any effects yet and compatibility issues will take at least six months to resolve," said an executive at Asustek, who declined to be identified.

He added that many corporate customers -- who tend to buy in much larger volumes than individual consumers and therefore can make a bigger impact -- were staying on the sidelines for now as individuals accounted for new buying.

"We've carried out numerous surveys recently with IT managers and they've all said they are not planning to migrate to Vista, and we are not expecting a major influx anytime soon," said Bryan Ma, an analyst at IDC, expressing a similar view.

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Different forms of Microsoft's various Windows operating systems now run more than 90 percent of the world's PCs.

Computer makers are now looking to strong buying from emerging markets such as China, Eastern Europe and Latin America to boost business.

Dell announced earlier this week a super cheap computer costing as little as 2,599 yuan ($336) specifically for China, now the world's second largest PC market by unit sales.

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GROWTH DRIVER

"Emerging markets are still a key driver for growth in the PC sector. Global PC shipments this year should grow by low double digits, in the 10 percent range," said Acer's Lanci.

The comment by Acer, which is trying to overtake China's Lenovo as the world's No. 3 PC maker, was in line with the outlook for the broader industry.

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IDC expects worldwide PC shipments to reach about 253 million units this year, up 11 percent from 228 million in 2006. That 2007 growth rate is up from the 9.6 percent posted last year.

Vista's newness aside, analysts also say the right computing platform, which is needed to run the operating system smoothly, is a main factor that will determine whether the software will be accepted in the near term.

"Intel's main Santa Rosa platform needed to support Vista features won't be launched until May 10, and in the last five to 10 years, the biggest PC driver is still price," said JP Morgan analyst Alvin Kwock.

Microsoft founder Bill Gates said last month that Vista has been well received and that PC vendors have seen a nice lift in their sales.

A week before his comments, Chief Executive Steve Ballmer had said that Vista would only create a "small surge" in PC sales for its fiscal year starting in July, and would not spur a big increase in normal growth rates.

"Vista was very popular in the first couple of weeks, but let's not just focus on that. Dell and Hewlett-Packard don't even advertise much on PCs with Vista," said JP Morgan's Kwock.

(Additional reporting by Sophie Taylor in Shanghai and So Eui Rhee in Seoul)

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