IBM and HP are in danger of being forced out of the PC manufacturing industry by 2007, according to analyst firm Gartner.

Gartner said on Monday that if profit margins and profitability drop too low, HP and IBM could be forced to cut their losses and leave the PC market.

"Of the top 10 worldwide vendors, only Dell has consistently been profitable in the past several years. The PC divisions of HP and IBM are vulnerable to being spun off if their drag on margins and profitability are deemed too great by their parent companies," wrote Gartner in a research note.

HP and IBM were both unable to respond to requests for comment at the time of writing.

Gartner predicted that PC vendors are facing a gloomy future, and that three of the top ten companies in the computer manufacturing industry will exit the market by 2007. Although it hinted that HP and IBM could be two of the companies, it did not mention a third.

The company said that slower growth rates and reduced profit margins in PC manufacturing will cause a drought in the market and cause companies to adopt consolidation tactics.

"The end of the replacement cycle is likely to strain viability for even the largest PC vendors in 2006 and beyond," said Leslie Fiering, research vice-president for Gartner?s Client Platforms group. "Global vendors will be forced to continue maximising supply chain efficiencies and, finally, abandon any efforts to differentiate other than on price and service levels. Exiting the market may be the only logical choice for global vendors bleeding profits and struggling for share."

Gartner said that the top 10 worldwide PC vendors by unit shipment are Dell, HP, IBM, Fujitsu, Fujitsu Siemens, Toshiba, NEC, Apple, Lenovo and Gateway.

From silicon.com