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UPDATE: PC Market Contracts in 2nd Quarter, with Little Boost from 'Ultrabooks'

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--PC trackers find contracting shipments of PCs in second quarter

--Tablets and smartphones continue to distract consumers

--Concerns arise about Windows 8 launch and whether consumers are holding off purchases

(Updates throughout with IDC data.)

By Ian Sherr

SAN FRANCISCO--Global growth stalled for personal computer shipments in the second quarter, two research firms said, despite heavy marketing by Intel Corp. (INTC) and its customers to push a new breed of sleek notebook computers called Ultrabooks.

Industry researchers Gartner Inc. (IT) and International Data Corp. said shipments of personal computers declined 0.1%, with the contraction numbering in hundreds of thousands of units. The results were the seventh consecutive quarter of flat or single-digit growth, Gartner added, underscoring weak demand amid economic uncertainties.

IDC said the quarter underperformed its expectation of 2.2% growth. Gartner did not have an official forecast for the second quarter, but expects PC shipments to rise 2% this year, with stronger sales in the second half.

Headwinds facing the PC market continue to include competition from Apple Inc.'s (AAPL) iPad and other tablets, which for some consumers have become primary devices for browsing the Web.

"Consumers are less interested in spending on PCs as there are other technology product and services, such as the latest smartphones and media tablets that they are purchasing," Mikako Kitagawa, an analyst at Gartner, said in a statement, noting that this trend is particularly playing out in saturated markets, such as the U.S.

Intel, which had previously backed low-end portables called netbooks, for the past year has tried to spur demand with Ultrabooks--higher-end laptops that have similarities to Apple's thin MacBook Air. The chip maker, among other things, has established a $300 million fund to promote Ultrabooks.

But pricing--often $900 or higher--remains an obstacle despite Intel's long-term goal of hitting mainstream price points. And IDC said some consumers who may have been attracted to Ultrabooks may be waiting for versions that come with Windows 8, a version of Microsoft Corp.'s (MSFT) popular operating system not expected until the fall.

Ultrabooks, added Ms. Kitagawa of Gartner, could change dynamics of the market, but not yet. "This segment is still in an early adopter's stage," she said.

Hewlett-Packard Co. (HPQ) remained the top PC maker by volume, with a 14.9% share of computers shipped by Gartner's numbers, or 15.5% by IDC's. The Palo Alto, Calif., company's reign was dented by percent declines in the double-digits both internationally and in its home country, where, however, it still represents a quarter of the market.

Lenovo Group Ltd. (0992.HK, LNVGY) continued its quest to become the top PC maker this year, growing its world-wide share at the expense of both H-P and Dell Inc. (DELL), to become the second-largest computer maker with 14.7% of the market by Gartner's data, or 14.9% by IDC's.

Acer Inc. (2353.TW) and Dell rounded out the top four, though the two firms disagreed about which one resided in which place. Acer was one of the first companies to release Ultrabooks, Gartner noted, and will likely be the first vendor to lower prices.

Meanwhile, Dell has been focused on increasing the average prices of its computers sold, reducing market share as a result. Gartner said that despite the strategy, it needs to "maintain a certain level of market share" in order to keep its supply chain efficient by leveraging economies of scale to keep parts prices low.

Apple, maker of the popular iPhone and iPad tablet computers that have contributed to the PC market's woes, ranked third in U.S. shipments, growing 4% to represent 12% of overall sales, Gartner said.

Gartner warned that U.S. government and education budgets continue to be constrained, something that H-P and Dell both noted in their conference calls recently.

Europe, battered by the euro-zone crisis, has also been a sore spot of weak demand, particularly in western and southern regions. Gartner said retailers have been taking a "risk-adverse approach," but noted that distributors may be building inventory that could hinder future growth, particularly when Microsoft releases Windows 8. IDC was slightly more positive about the region, saying inventory in distribution channels appeared to have returned to healthier levels, with demand even appearing to grow.

IDC put second-quarter PC shipments at 86.7 million, while Gartner put the total at 87.4 million.

-Nathalie Tadena contributed to this article.

Write to Ian Sherr at ian.sherr@dowjones.com

(END) Dow Jones Newswires

July 11, 2012 19:29 ET (23:29 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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