It’s been clear for a couple of months now that few people are buying PCs – and that those who are buying are extremely cheap. On Monday, a report from Morgan Stanley gave the latest estimate of how declining prices and frugal consumers will affect the industry over the next couple of years. The findings aren’t encouraging.

After a visit to Asia to assess the industry, a group of Morgan Stanley analysts led by Kathryn Huberty concluded that the PC market is worse than they initially thought. They lowered their estimate for 2009 and 2010 PC sales. Earlier, Ms. Huberty had predicted that global PC sales would drop 10% this year from last year; now, she’s estimating PC revenue to decline by 24%.

The problem is a combination of declining unit sales and lower PC prices, due both to the rise of netbooks – cheap mini-notebook PCs that sell for $500 or less – and people buying cheaper conventional PCs. It’s a trend that Hewlett-Packard Co. pointed out in its quarterly earnings announcement last week, when it reported a 19% drop in PC sales from a year ago. Even though it gained PC market share over rivals number-two Dell Inc., there was little H-P could do about cheap consumers. Chief Executive Mark Hurd said in a conference call with analysts last week that “somebody who was buying a more thickly configured notebook [is] now buying a more thinly configured notebook.” That means less revenue for companies like H-P.