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Notebook Market Faces Slump

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DQC News Bureau
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The notebook market is in a flux today. Prices of entry-level notebooks are

going down and more variety of notebooks are coming in. But buyers seem to be

simply not interested.

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Understandably vendors and channel partners are resorting to different

strategies to woo customers. A few vendors are trying to implement a combination

of rigorous and periodical training programs for their channel, along with

attractive incentives, to increase sales.

S Rajendran, GM-Marketing, Acer India, points out that IDC's initial forecast

of 40 percent growth is unrealistic in today's market. He is of the opinion that

even achieving 20-25 percent growth would be tough.

Insipid market growth

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Narrowing price tags of entry-level notebooks should increase the demand for laptops in general.

FX Infotechnologies sells almost 35 units of entry-level and 15 to 20 units

of mid and high-end notebooks per month. Sunil Jose, Manager, points out that 80

percent of the company's sales come from the SME and corporate segments. SOHO

contributes the rest.

According to him the market is growing at the rate of 20 percent. This

opinion is substantiated by JA Johnson of Futuristik Control Networks who says

that the average market growth rate is 18-20 percent.

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Sudhakar of Lerana Infotech finds these growth figures highly optimistic.

Says he, "Growth figures will depend on the corporate buying pattern."

A sentiment that is echoed by Girish R of Gates Technologies and Jayant Nair of

LM Technologies who have seen disappointing sales in notebooks in recent months.

According to sources in Vitesh Systems, the company recorded a 40 percent

drop in the notebook business as against its previous year's performance.

Market expectations

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Channel partners foresee a stability in demand and increase in sales of

notebooks by mid-2002. "Notebook sales should grow at a healthy rate of 35

to 40 percent by early next year," says Sunil Jose of FX Infotechnologies.

According to him, the growth in the notebook market could be largely

attributed to the growing demand in mobile devices in the country. He adds that

the demand will increase in the entry-level slot of notebooks due to the drop in

prices.

Jayant also believes that the sales should improve around the same period. He

points out, "Entry-level notebooks are largely considered as a replacement

for desktops. So the growth and demand is directly proportionate to the

advancement in the PC market."

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Though desktop PCs will continue to record a growth in its sales, notebooks

will carve out a niche for themselves with the mobility and performance of a

computer being the driving factor among users.

For the mid and high-end notebooks, customers mainly come from niche

verticals in the market. Here the deciding factors are aesthetic looks coupled

with rich features. Buyers in these verticals are not price-sensitive, which

helps channel partners earn higher margins in comparison to the entry-level

notebooks.

Fighting challenges

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Besides the current slowdown, there are other challenges staring in the eyes

of resellers. These include low awareness about notebooks and poor understanding

of its productivity benefits.

Apart from this, given the fragile nature of the product, including the small

form factor and TFT flat panel, it is necessary to educate customers on how to

handle the product carefully.

To address these issues, vendors and channel partners have been organizing

roadshows and seminars at regular intervals. These have had a positive effect,

especially among corporate buyers.

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According to Ranjit Nambiar, Senior Manager Sales (Frontline Division), HCL

Infosystems, the conversion rate of prospective corporate buyers into customers

is around 60 percent as against a 25 percent in the SOHO segment.

Investing in channels

Expecting notebook business to improve mid-next year, partners are adopting better sales strategies.

There is a need for more informed and trained personnel to provide robust

after-sales support. Vendors have decided that the best way to go about this is

to invest in their channel partners, both sales and service. This investment is

largely to keep them updated on the technology, as well as better ways to

provide after-sales support. "We have dedicated Acer Care Clinics in the

top nine cities to provide easy support for notebook customers," says

Rajendran of Acer.

In a move to boost channel sales, Compaq Computers has rolled out special

programs for Compaq notebook resellers (CNR), which will give them ample

opportunity to earn incentives, with relatively small effort in promoting the

company's notebook product range. The CNR programs are targeted at resellers who

bring in orders for Compaq’s notebook range and is focused towards a specific

market segment.

According to the program, a dealer from Compaq’s channel network can

register himself as a Compaq’s notebook reseller. Top performers from this

program are assured with awards, which would motivate them to record better

results. Compaq claims to have built technical expertise within its channel

network through this program, while motivating them to become leaders in their

respective segments.

Living on the edge

In light of slump in demand, the going is certainly not easy for channel

partners in the notebook business. Those who are selling to SME and home

segments will see a dip in their sales.

Those who are selling to the corporates stand a better chance because in this

sector, there are still requirements and budgets allocated for the purchase of

notebooks. However, Ranjit of HCL Infosystems says that there has been a drop of

10 to 12 percent in the demand coming from this segment.

However, a positive aspect to notebook-selling is its margin structure.

Typically the margin structure varies for different levels of the channel

network.

Distributors can earn anything from a five percent margin for a sub-Rs 70,000

entry-level notebook, going up to over 10 percent on the high-end models.

Dealers, on the other hand, stand to gain three to four percent on entry-level

and high-end notebooks respectively.

When demand dries up, what can bring cheer is repeat business. Customers

always come back when they are assured of prompt support. Partners have to look

at these options before the market upturns for good.

Vendors from their side are pitching in to popularize the usage of notebooks

in order to generate demand. Also, the dropping prices of entry-level notebooks

should also push up the demand. Or so the channel hopes!

Sunila Paul in Bangalore

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