The more optimistic turn of events caps a chaotic year. At the start of 2002, PC sales slightly exceeded forecasts, driven by consumer purchasing. The market then slowed down in May and June, resulting in an excess supply and declining prices of processors, memory, monitors and other components. AMD in particular was affected by the component glut. Revenue turned sharply downward, and the company lost several market share points to Intel. For its part, Intel adjusted to the new reality by announcing it would reduce its headcount by 4,000 by the end of the year and decrease capital spending in 2002, from $5bn to $4.7bn. While the mood stayed gloomy through September, a thaw began the following month. "All the indications are that October has been a good month," Mercury Research analyst Dean McCarron said at the end of October, after conducting interviews with manufacturers and distributors. The big question for 2003 still looms, though: When will corporate buying pick up? Bryant gave no real answer to that question, but Intel executives have said in the past several weeks that the advanced age of the installed base of corporate desktops will begin to prompt an upgrade cycle, if only a small one. The last big run of corporate upgrades occurred in 1999. Those desktops, which contained 500MHz processors, are slow by today's standards and inevitably break down, said Steve Asbjornsen, manager of business demand creation at Intel. Security will also drive purchases. More and more companies are requiring employees to regularly run virus scans and download software patches. (Inside Intel itself, employees are required to download patches, or else their computer locks up.) Older computers bog down when trying to perform these tasks while simultaneously running other applications, such as email programs. Microsoft also will discontinue issuing security patches for Windows 98 and Windows NT by the middle of next year. Since most people upgrade their operating system by getting a new PC, a surge of Windows XP upgrades could mean increased computer sales, Asbjornsen said. Still, executives at other companies point out that these are upgrades driven by entropy. A flourishing upgrade cycle won't occur until new applications come out.
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