ANALYSIS: Notebooks save the PC channel

Figures released by Inform, IDC and Gartner all point to steady growth in the portable PC market, with channel players having trouble getting their hands on the most sought-after models.

Channel analyst Inform has reported gains in PC sales in March 2002, mainly due to notebook sales increasing by around 43 per cent. Meanwhile, Gartner found that the overall notebook market grew by 13 per cent over the first quarter. Vendors are also talking up their sales, with Toshiba general manager Ralph Stadus reporting that the booming sales period that gave the vendor its biggest month ever in January is far from over.

Gartner analyst Andy Woo said there are several factors at play in boosting notebook sales, including technological advancements, lower prices, end-user confidence, the growth of wireless infrastructure and higher margins for the PC channel.

High-end portable computers are advancing to the point where analysts now say that the "desktop replacement model" is doing exactly what its name suggests rather than just being another marketing catch-phrase. With high-performance, mobile-specific chips on the market, the performance gap between desktop and notebook computers is narrowing.

"Users no longer have to compromise on screen size, memory capacity, hard drive capacity or processor speed when buying a notebook," said David Nicol, brand marketing manager for IBM mobile computing.

At the low end, market dynamics are also working in favour of the notebook. Vendors are releasing a wider range of entry-level portable computers that are priced below $3,000, affordable enough to be palatable to small business and even home users.

An increasing number of low-end notebooks are using AMD Duron or Intel Celeron chips and other cheaper components to achieve more affordable price points. Inform analyst Chris Herbert said 28 per cent of notebooks are running on such "value" chips, compared to 19 per cent 12 months ago. To some extent, this strategy was necessary to counter the price effect of component shortages that plagued manufacturers in the preceding months.

Deployments of wireless LAN infrastructure are also reinforcing the benefit of mobile computing. "Sweet spots" such as airport lounges are becoming equipped with wireless LANs and the 802.11 standards are increasingly accepted by users. "The beneficiary at the end of the day is the guy selling the portable computer," said Woo.

High demand for notebook products is due to a renewed interest in productivity gains among end users, Woo said. Employers are coming to the realisation that if they gain an extra 10 to 15 hours of work out of every employee, the productivity gains are worth paying more for. "A mobile employee is simply a more productive employee," Nicol claimed.

Many businesses are using the notebook computer as a tax relief. Being a tax-deductible item, the notebook is becoming a more common item in salary packages.

Notebook computers are also products the channel is keen to promote and sell, said Woo, as they nearly always earn resellers higher margins than desktop PCs. "The distributors and resellers are getting behind them," he said. "They are saying, why push desktops if I could push portables?"

So much so, that several resellers have expressed concern about getting their hands on certain "hot" models within a reasonable time frame. The popularity of both the entry-level systems and the best of the high-end performance notebooks is stretching vendors, distributors and resellers to supply product to end users that are increasingly aware of the specifications they need from a notebook computer. Page 28 of ARN this week looks at several of the issues the demand for notebook products have generated.

In the near future, analysts predict notebook sales will remain steady if not grow further. Inform's research suggests overall PC sales may increase by around 7 per cent this year, while Gartner is confident the notebook market will continue to drive this growth at around 13 per cent.

The introduction of Intel's Pentium 4 processor, of which the manufacturer has released specific models for the notebook market, will also be a platform for growth. "Intel controls the dynamics, the way the market works," Woo said. "It will control supply, and at the end of the day Pentium 4 is what it will be out to push. I expect Pentium 4 will be the critical mass for the notebook market."

The third quarter will also see businesses begin the replacement cycle after the Y2K upgrades just prior to 2000. "Many pockets of the end-user community will consider moving to a mobile platform," Woo said.

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