Consumer Notebook Market Eclipses Corporate For First Time -- Positive for HP, Apple, Gateway (HPQ, AAPL, GTW)

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Includes: AAPL, GTW, HPQ
by: Andy Neff

Research firm IDC recently released forcasts for the notebook market by form factor and end market. In a note to clients, Bear Sterns analysts Andrew J. Neff, Bill Hand, and Ted Chung commented on the results and implications for the major players in this market:

Notebooks should eclipse desktops in mature markets. With notebook units growing at 25%+ over the past 3 years (vs. desktops at ~10%) and expected to grow at 20-25% in 2006 (vs. desktop at 5%), notebook shipments are expected to exceed desktops in several mature markets (US, Western Europe) by late 2007 or early 2008, propelled by the consumer, though not on a worldwide basis owing to popularity of low-cost desktops.

Consumer market accelerating notebook growth. The mix of notebook shipments in consumer eclipsed that of corporate for the first time in 2005, with the gap expected to increase over time to nearly a 50/50 desktop/notebook split in 2010 for consumer as compared to only a 57/43 desktop/notebook split for corporate. Overall, IDC forecasts a 20% CAGR (from 2005-2010) for consumer notebooks versus 15% for corporate, which is particularly positive for Hewlett-Packard (NYSE: HPQ) given its higher-margin consumer/retail notebook business and, to a lesser extent, Apple (NASDAQ:AAPL) and Gateway (NYSE: GTW).

Growth driven by emerging notebook sub-categories. While “thin and light