Outlook bleak for PC €urobusiness
Single digit figures don't buy many cocktails
By Mike Magee, 19/05/2002 11:32:48 BST
GET THE HEADY MIXTURE of 600 vendors, distributors and system integrators together in Monaco and tell them the days of fast growth are at an end, four hours before you serve them fizzy cocktails.
That seemed to be the main message from Brian Gammage, principal analyst at Gartner when he opened the System Builder forum earlier this week, with very few reasons to be cheerful except for multinationals coming a cropper over brands, and rapid notebook growth.
According to Gammage, compound growth between now and 2006 is only going to be around 3.5% and, in his words, "we're never going to see the days of double digit growth" again.
He said that in volume terms, the PC industry is delivering diminishing returns. System builders, he said, can expect to see the multinationals – here he means firms like HPQ and Compaq – become more aggressive. But Gammage made an interesting point about branding. According to him, commoditisation leads to reduction in brand value, and that gives the smaller system builders a chance to grow their business at the big brands’ expense.
Hardware capabilities, he said, have outpaced software for at least four years and there’s still little sign of software forcing people to upgrade their businesses.
This, reckons Gammage, should drive fear into the hearts of system builders everywhere.
Because system builders are making products that last much longer, and because Intel and AMD continue to knock hammer and tongs and nine bells out of each other in terms of real performance, that pressure on the system builder market is not going to go away anytime soon.
Although Intel and AMD both publicly say that pure performance is not the name of the game any more, Gammage said that system builders needed to get the message across – to their customers – that enough performance is enough.
Notebooks were now becoming a commodity item, he said, and the real growth in this year is in that market, at around the 40% mark.
That gives system builders the chance to approach small and medium businesses, which are ready to adopt this type of technology.
These type of businesses tend to buy from people they already know and work with, he said. Asus has already established notebook service centres all over Europe and, he said: "You'll find AMD and Intel are very happy to help you."
He told system builders that they shouldn't be possessed by "delusions of grandeur" and to concentrate on their core businesses.
Now this is all very well – we know, for example, that big vendors like IBM have patently failed to crack the small and medium business market – but there is a bit of a problem.
While vendors at the System Builder conference played up new opportunities and said that the industry was going through an "exciting" phase, the reality appears to be very different indeed. As we've suggested here before, sales of machines and PC peripherals are very sluggish in the second quarter, inventory is at an all time high, and there isn't really any compelling reason to buy a PC – especially for those people who have bought one before and seen what a PC can really do for you.
Most system builders at this conference are already aware of how bad things are and one or two of them told us they thought selling groceries or newspapers might be a more lucrative opportunity in the future. This is all a far cry from the early days of the PC twenty years back when margins for dealers were up at the 50-60% market, we can't help but observe.
The whole PC vendor industry seems to be convinced that the future lies in audio and video – and they may be right – but add the price of a top notch PC and then all the peripherals you can add to it, and you're still not talking small beans, particularly in a depressed economy. µ
* GARTNER GAVE out some Q1 2002 figures for Europe at the show. According to those figures, processor shipments in Q1 2002 were 7,843,084 Intel CPUs, 1,823,996 AMD CPUs, and 212,239 "other" CPUs, giving market shares of 79.4%, 18.5%, and 2.1% respectively. Year on year growth for the quarter were –1.7% Intel, 21.1% AMD, and 3% "other" (Via?).
We believe that Dataquest Gartner bases its figures on machines shipping Windows systems, so these results have to be viewed with that in mind. |
