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Hope on bleak horizon for PC vendors

Hope on bleak horizon for PC vendors

PC vendors selling here have cause for optimism, with market analyst firm IDC predicting slight growth in the third quarter of this year and tipping more robust growth towards the end of 2009.

However, this year as a whole seems unlikely to provide the boost PC makers hoped for, with IDC forecasting a 12 percent overall decline in the market, saying it has been prevented from contracting further by the performance of consumer PC shipments and mini-notebooks.

Locally, shipments of portable PCs are expected to bounce back to a growth rate of more than 15 percent next year, from the negative 12 percent expected for this full year.

IDC predicts netbooks will grow at a rate of about 5 percent in shipments for 2010, dropping to about one percent the following year and rising to about three percent in 2013.

Notebooks are expected to be the clear PC market category leader in terms of shipment volumes by 2013, followed by consumer notebooks and commercial notebooks.

For the second quarter of 2009, portable PC shipments declined 9 percent year on year, while desktop shipments were down 30 percent year on year. Sequentially, portables were down by 3 percent.

Toshiba country manager Gary Wicks says he is happy his company only supplies notebooks, given the category’s performance against desktops in quarter two.

“In the portable space it’s not that bad. We are quite happy to be in this space in the long term.”

He says Toshiba’s performance was “fairly steady” in consumer notebooks in the past five quarters to Q2 this year. Wicks says there was a “glitch” in the second quarter with a negative impact due to the exchange rate and he believes customers were stocking up in advance of the quarter anticipating prices would be higher.

However, he expects the rest of 2009 to pick up, with more favourable exchange rates and the release of new products to coincide with the launch of Windows 7.

Toshiba New Zealand posted a $1.45 million loss for the year to 31 March 2009, following a smaller loss of $364,000 to March 2008, however sales revenue was up by almost $20 million over that time.

The company was negatively affected by foreign exchange impacts last year and Wicks says it couldn’t raise prices enough to absorb these impacts. “But [for] a company like Toshiba that’s been around so long those ups and down come as no surprise, so now if prices aren’t going down rapidly they’re being maintained.”

Wicks also observes that PC prices “skewed down” in the past 12 months to Q2 2009. “People are buying a less expensive product. Areas we’re seeing that are stronger are in that class of product, the SMB-type product, and those are now going into the corporates.”

He points to the growth of sales in PCs in the $700 to $1000 price band, the netbook sector, which comprised 34 percent of the consumer category for the quarter, with those in the $1000 to $1500 band making up 26 percent in total.

By contrast, the commercial market remains dominated by the $1500 to $2000 price band in Q2, which makes up 29 percent.

However, he says Toshiba ensures it covers the top end of the market, too.

“We have a strong business in the high end as well and that balances it. Some other vendors [are] concentrating just on low-end products and that really hurts them.”

Infrastructure and IT services associate analyst Stefan Nordbruch, of IDC, says the outlook for 2009 has continued to deteriorate over the course of the year.

“Traditionally, quarter two is a strong quarter so it is interesting to still have a decline in the seasonal quarter. However, commercial desktops and notebooks were up 1 and 2 percent respectively. There has been some activity in the education space around netbooks, which accounts for most of that growth.”

But IDC is still predicting notebook sales to lead desktops in a recovery back to shipment levels of approximately 180,000 units, a level last seen in Q2 of 2008.

It says commercial notebooks saw a small seasonal uplift of 2 percent, but still declined 14 percent year on year compared to consumer notebook’s 6 percent sequential and 4 percent year on year declines.

Nordbruch says netbook sales continue to grow quarter on quarter. “What we’ve seen in 2009 is netbooks have significantly outgrown traditional notebooks and for 2010 I would predict the share of netbooks will actually start to marginally decline. That’s due to the fact new types of netbooks are entering the market.”

These include low voltage models. “That is a market that could grow, but it would not fit under the netbook category,” he says. IDC defines low voltage models as a notebook due to their larger screen size and processing power.

Consumer desktops declined 11 percent from last quarter and 28 percent year on year, whilst commercial desktops remained largely flat after three quarters of declines, IDC says.

The top-five desktop and portable vendors remain unchanged since quarter one this year, with HP holding its number-one positions in each category and Acer still in second spot in desktops.

Nordbruch says the gap between HP and the other top vendors is significant. “Whilst there have been some changes in terms of shipments, it hasn’t been enough to affect the rankings yet. That may change in the following quarter.”

HP maintained just over 30 percent market share locally and bucked the trend of vendor losses last year.

In February the vendor posted its New Zealand financial results to the end of October 2008, reporting a net profit of $27.4 million, up from $16.7 million for the previous period to October 2007.

Personal systems group marketing manager Warwick Grey attributes its market share performance to a strong product range across the business, consumer and education segments. “We’ve maintained share in a declining market over our competitors and it is critical for HP never to lose share,” he says.

Like IDC and Toshiba, HP sees growth in netbooks.

“We did see growth in netbook sales mainly in the consumer mini note category, as a result of consumers looking for low cost, entry level, ultra-portable devices.”

Personal systems group manager Brent Kendrick says the vendor wasn’t affected by falling unit shipments in 2008, despite the decline in volumes affecting the market.

“HP NZ effectively maintained overall desktop market share in calendar year 2008, even though unit shipments declined in all quarters.”

Kendrick says HP has made increases in supply chain operational efficiencies and released new product. “This led to improved profitability and entry into new market segments.”

Education, enterprise and the SMB segments were strong performers for HP in 2008. “Margins held up well in 2008, however they have come under pressure in 2009 as a result of the economic environment and shift to entry level price points,” he says.

Kendrick adds that Q3 this year will remain soft, but a recovery in Q4 is expected as a result of the Windows 7 launch in October and the traditional Christmas/Boxing Day sale period.

“With signs of a recovery, we can expect to see growth in the SMB segment as a result of pent up demand.”

Acer country manager Mark Dalton says the Q2 results were pleasing, although it is still chasing the number-one desktop spot.

“We’re expecting another gain in Q3 in desktop and portables. One thing that’s going to change the market substantially going forward is the integration of 3G into notebooks. We’ve got a large deal already under way with Vodafone.”

Acer’s revenue fell about 23 percent to December 2008 over 2007, with the local business making a loss of just over $1 million, compared with a profit of over $2 million last year.

Dalton says he had not seen Acer’s global financial results and would not comment on the local results.

However, he says the company had a strong Q3 2009 year on year.

“We had a successful launch of [the] Gateway and eMachine brands so we were hitting different aspects of the market. It has helped our business in retail.”

Dalton adds that retail has remained strong for Acer in the second quarter this year. “It is mainly in distribution where our business has been hit hardest and that could be because the downturn hurt the SMB market [more] than anyone else.”

More SMB customers are choosing to buy at retail instead of through smaller dealers, he believes.

“With the interest-free terms they may see that as a more attractive way to purchase than through the smaller deals. Our enterprise business has been quite strong and we have picked up a couple of big clients this year.”

Dell was another vendor to make a loss locally last year — it posted an overall loss of $336,000 for the year to January 2009, compared with a profit in the previous corresponding period of $430,000, according to Companies Office records, with revenue falling during the period by about 10 percent to $16.08 million.

Country manager Mike Hill and ANZ channel strategy and acquisition director Rob Makin say they are unable to comment on the financial results to January.

When asked if Dell sees signs of the local market picking up, Hill said the company doesn’t provide forward-looking projections.

He says Dell isn’t seeing large enterprise or public sector customers opting for “SMB products” because its products have long lifecycles and offer a stable platform.

Q2 2009: The numbers year on year

Overall New Zealand PC market down 19 percent

Portables down 9 percent

Commercial notebooks down 14 percent

Consumer notebooks down 4 percent

Desktops down 30 percent

Consumer desktops down 28 percent

Commercial desktops down 30 percent

THE TOP FIVE

Desktops: Laptops:

1.HP 1. HP

2.Acer 2. Toshiba

3.Dell 3. Acer

4. Apple 4. Apple

5. Lenovo 5. Dell


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