Gartner is warning that the PC industry faces major challenges in the near future, caused by continuing low profit margins, highly standardised products and oversupply.

At the same time, new and disruptive technologies will add to the risks that PC vendors face by presenting them with technology investment decisions that they can't afford to get wrong.

One in particular, PC virtualisation, will challenge the relationship between hardware and software vendors.

The growing gap between realistic levels of profitability and shareholder expectations will intensify pressure on PC vendors registered in the US, Japan and Europe, says Brian Gammage, a vice president at Gartner.

'This will open up the market to emerging market vendors which have lower labour costs or more modest margin objectives,' he said.

Annual PC shipment growth will average eight per cent between 2006 and 2009, but revenues will remain flat, leaving many PC makers to struggle.

According to Gartner, even Intel and Microsoft - companies who have resisted the move to near zero profit margins and maintained high per PC revenues for the past three years - will come under increasing pressure to innovate.

That pressure can be seen in today's announcement by Microsoft of a series of 'internet-based software services' including 'live' version of Office and Windows, a move aimed at carving out a niche in PC virtualisation.