Desktops & Notebooks

By : |July 31, 1999 0

The Indian PC mart was not exactly the most happening place
in town. It grew by 32.4% in unit terms and just 7.3% in value terms. Therein hangs a
tale. Average selling value (ASV) climbed a bit to hover in the region of Rs 30,000 as
low-cost PCs became a hit with the home and SME sectors.

The growth figures of 1994-95 and the following year at 60
and 50% respectively are now history, and so is the measly 22% recorded in 1996-97. The
market seems to be headed for mature and steady behavior ignoring a sluggish economy,
growing at 5.5%, with politicians running amok. However, for past couple of years the
industry has been advocating the one-million-shipment target which, unfortunately, could
not be achieved this year either.

The previous year, when the industry was suddenly shaken
out of its stupor to discover that the home and SME sectors could be the proverbial Davids
guzzling more PCs than the corporate and government Goliaths, it had just braced itself
for a pleasant surprise. But last year the market saw greater segmentation with more
precise positioning of products. For example, the bare-speced Brio from HP graced the
market in September to target the SME segment while the multimedia Presario from Compaq
touched base with the more discriminating home sector in February.

Desirable desktop
HCL Infosystems retained the top slot among PC desktop vendors, no mean feat
this. But that is where the story ends because while in 1997-98, HCL’s figure was 90,880
desktops, last year the company shipped almost the same number, at 92,000. Its market
share therefore has dipped from 15% of the market to 11% and the lead it had established
(the next two vendors in the pecking order collectively could not match up to HCL’s
numbers) is history.

Zenith and Compaq accounted for more than a lakh desktop
PCs. Like 1997-98 HCL’s marketing focus was more on the home and the SME sectors while it
kept distributing HP’s Vectra for the corporate buyers along with its homegrown Infinity.
HCL has done well to switch to computer carnivals and other consumer events aimed at the
home market. However, the great Indian vendor will have a tough time retaining its turf as
the MNC prices are catching up with Indian price points helped in part by the steady dip
in customs duty on finished IT products.

HCL’s quantum jump in 1997-98 was partly
attributable to the sudden demise of PCL which left a vacuum for HCL to exploit. Last year
Unicorp performed a similar disappearing act after selling almost 25,000 desktops the
previous year but its disappearance barely caused a ripple in the market.

Zenith registered a substantial increase
in units terms. Its market share went up very marginally while in revenue terms its share
dipped from 5.9% to 4.9%, which only shows its competitive pricing. The trend began with
Q1 itself when Zenith introduced a Pentium 200MHz MMX-based multimedia PC at Rs 33,500, a
price point even assemblers and regional brands found tough to beat. This resulted in the
highest ever shipment for Zenith in any quarter. Just when the effect was waning, Zenith
wowed the market with a sub-Rs 50,000 PIII desktop, forcing other vendors to fall in line.
The company is also well placed with corporates who prefer MNC brands as servers and
domestic brands as nodes. Zenith is a channel partner for HP and IBM.

Compaq came third in unit terms but stood
second on the value front. It was one of the first to launch Celeron-based desktops. Last
year it discontinued the Deskpro 2000 series and launched the Deskpro EP and EN series,
which accounted for more than a fifth of its shipments. Compaq also aggressively promoted
the Presario range with its 25 channel partners so that it is seen as one of the major
home brands today. The company entered into a strategic alliance with Canon making Canon
its lead partner for printer products working together to offer one-stop solutions to PC
buyers with joint promotional activities. HP used the same tactic bundling Deskjet 200J
with Pavilions. Compaq’s forte really lies in the corporate sector, which continued to be
in the doldrums and it was busy formulating and adjusting to new norms as a result of its
acquisition of Digital.

HP became a full-fledged player only a year ago.
This time it launched two brands that look like shaking up the market. The Brio debuted in
September. Aimed at the corporate sector it broke the Rs 40,000 price barrier. Brio was
launched in order to attract the rapidly growing and more price-conscious SME sector. Not
content with the SME sector HP decided to have a serious dekko at the home with the launch
of the Pavilion in February bundled with a printer and a 10-hour internet connection from
Satyam Infoway. Cheaper than its rival, the Presario, this product could see HP penetrate
the home market.

IBM ranked fifth among PC vendors in unit
terms but due to its strong dependence on the corporate sector, shipments went up only
marginally compared to the previous year. The ASV, however, went up and so did overall
revenue.

Acer relaunched two brands last year, with
a lot of energy being directed to fresh branding. Its breakup with Wipro was
waiting to happen, meaning the company would have to rely heavily on its channel partners.
Even last year its sales had shrunk. Wipro resurrected its SuperGenius brand in a bigger
way positioning it to address the SME and home markets at a 10-15% premium over the
assemblers and regional players. The SuperGenius also scales a wide spectrum of price
points.

Vintron retained its position among the
Top 10 vendors and grew by more than 50% in units. During the first year of launch itself,
ie 1997-98, Vintron sold more than 10,000 units. Late last year it launched its Elixir
range, one of the cheapest ranges in the market. Vintron remains, by and large, a northern
India player and product-wise has just desktops to offer. The absence of system
integrators or value-added resellers hampers Vintron in offering comprehensive solutions
to large accounts, especially in corporate and government sectors. Last year Vintron tied
up with HP to sell the latter’s desktops, notebooks and PC servers, which may help it
bundle its PCs with HP servers.

The surprise of the year came really from Minicomp, the
Mumbai-based company which shipped over 25,000 PCs. Vel Computers and Computech too
notched up brisk sales in the south and east respectively.

During the year Dell announced its intention to set up shop
in the country. The $18 billion global IT major has shown none of its famed dexterity in
selling through the Net here and has restricted itself to more conventional channels.

Barebone systems also made their mark in
the market. In keeping with worldwide trends, distributors are beginning to manufacture
barebone systems (boxes with minimum necessary components that can be promptly shipped
with customized requirements). Such distributors include GPTL, Nebula and ERIL. Barebone
systems are cheap and particularly useful for non-excise registered assemblers.

One of the celebrated events of 1998-99 in the desktop
market was the launch of the iMac. Apple had been lying low for long, but last year it
hitched its wagon to the Internet boom by launching the translucent Bondi blue computers
amid a worldwide media blitz. But while the marketing blitz resulted in the iMacs being
lapped up in the US, in India many ogled and salivated at the translucent curves of the
Mac, but this gawking did not translate into sales. The initial price point of Rs 80,000
plus was too much for price-sensitive Indian buyers. Figures from all the resellers just
amounted to about 1200 units. As regards the more powerful G3 Power Macintoshes, about 700
were reported to be sold in the country.

Notable notebooks
Each of the Top Five vendors in the portable market grew. But the growth was not
substantial as notebooks are still unaffordable for SMEs.

IBM’s portable shipments grew 16%. The
company provided strong support to the low-end model, ThinkPad 310, as well as the
high-end PII-based one, ThinkPad 600. The year saw the launch of ThinkPad 770ED with a
14.1" TFT screen and a DVD drive was launched in the premium range but it was the
low-end models that accounted for almost 80% of notebook revenue for IBM.

Compaq shipped the highest number of
portables in 1998-99. The Presario and the Armada, some of the best-recognized notebook
brands, sold over 5,300 units during the year. The company bagged some good corporate
orders from Baan, Reliance and Castrol. Toshiba, which is selling through
HCL Infosystems, saw an increase in unit sales of notebooks from 2,100 in 1997-98 to 3,900
last year. Acer portables, on the other hand, did not make a significant
climb compared to 1997-98 and hovered in the range of 1200.

HP, not satisfied with its PC foray,
launched the OmniBook range of portables in the second quarter of 1998-99, appointing GPTL
as the sole distributor. The OmniBooks are available in Pentium 233MHz MMX or Pentium II
226MHz variations. However, GPTL could sell only 247 of the notebooks. Dell
managed
to sell more than HP and, at 650 notebooks, it is ranked fifth. SNI portables were at
sixth position, with 500 units, followed by HP at 350.

Powerful processors
1998-99 saw the launch of multimedia PCs based on Cyrix’s MediaGX processor.
These were available at price points below Rs 30,000 during the second quarter. This
helped PCs become more affordable for home buyers. Leading chipmaker Intel discontinued
the shipment of Pentium 200 MMX and Pentium 233 MMX processors, leaving only the Celeron
as its reply to Cyrix. But the absence of Level 2 cache from the Celeron chips hurt its
popularity initially. Only in the latter half of the year did the situation ease for
Intel, with the availability of 128 KB cache on the 300MHz and 333MHz chips. The big news
for Intel, however, was the launch of the PIII. And PC vendors raced each other to
introduce a sub-Rs 50,000 PIII-based systems—Zenith walked away with the honors.

The bigger news for Intel, though, was that National
Semiconductor stopped the manufacture of Cyrix chips which had a 12.5% market share last
year. National, despite being a small player in the PC processor market, had made a
significant dent, gaining a reputation for itself in the marketplace. In fact, its
pricing, apart from AMD’s, was seen as the main reason for the slashing of processor
prices by Intel and creation of the low-cost PC segment in 1998. Cyrix made possible
multimedia PCs for just Rs 30,000. During 1998-99, through aggressive pricing, 100,000
Cyrix-based PCs were sold in the country, while worldwide its market share was close to 7%
of the total PCs sold.

The GID strategy proved a winner for Intel and it
consolidated its market initiative. Last year the overall strategy was to add value to
Intel’s channel partners through regular core training programs, special programs
empowering them to grow across the market, and through promotional marketing activities.
The chipmaker also launched the Intel Finance Scheme (IFS) program, giving an option to
consumers for buying PCs now and paying later in easy instalments.

AMD has been planning to enter the Indian market in a big
way for quite some time. The company is planning an office in the country, though the date
is yet to be finalized. HP, for one, is already using AMD’s K6 chips in some Pavilion PCs.

Deadly distribution
There was more movement in the channels last year. For MNCs, distributors are the
bread winners while for the likes of HCL and Wipro, the dependence is less. With increased
competition, margins have been dipping. As the million-unit mark gets closer, distributors
need to be more professional, adhere to credit discipline, inject fresh funds and gain
better logistics control. GPTL and Redington are headed in that direction and recorded
substantial growth last year. Upping the ante this year will be, of course, ERIL,
subsidiary of the world’s largest IT distributor, Ingram Micro.

Last year there was apprehension among established
distributors that distributing majors such as Merisell and Inacom might set shop in India.
That didn’t happen. One notable vendor, Unicorp, signed off the distribution business with
the message that distribution is an intense and delicate job. ERP, systems integration,
networking and distribution don’t go well together. At least they didn’t for Unicorp.

‘Homing’ PCs
More than two hundred thousand PCs went home this year, a fourth of the
total sold in 1998-99. The overall market grew at 33%. The home segment grew at a
scorching pace of 89%. According to IDC (India), HCL kept up the lead it had taken the
previous year and claimed a market share of 9% by units and 10% by value. Zenith came a
close second with 9% by units and 8% by value. The top six vendors were HCL, Zenith,
Compaq, Vintron, Wipro and HP. Cumulatively, the top six just accounted for 26% of the
total home market in unit and 30% in value terms. The assemblers and GIDs made headway in
70% of the market.

Last year the absence of strong packaging—a single,
shrink-wrapped product with well-defined specs and service and warranty was lacking.
That’s not true anymore. Take the latest entrant, HP’s Pavilion. The Pavilion 4403 comes
with an AMD K6 processor, 3.2GB hard disk, 15" digital monitor and a host of other
features. MNC majors, domestic brands, GIDs and assemblers have never been in such eyeball
to eyeball (read price point to price point) confrontation. Some of the PCs are shipping
with an in-built modem and are bundled with a printer and an Internet connection. In an
assembled PC, if one actually puts together a machine with the same specs and adds on the
cost of a printer and Net connection, it would cost between Rs 40,000 and Rs 45,000,
precisely the price points the Presario and Pavilion hover around.

The outlook
PCs being the building blocks of the IT industry, they drive the demand for a
spectrum of other products and services. PC sales are a reasonably accurate barometer of
how the IT industry is faring. The opening of the ISP market should fuel PC sales in the
coming year. Banks and financial institutions are expected to continue with their
computerization programs aided by the World Bank.

On the flip side, Kargil and the prevailing political
uncertainty may discourage fresh investment decisions. Continuing inflation in the Indian
economy may also have a dampening effect on home buying as disposable incomes get eroded.

Desktop PC Vendor Share (1998-99)


Units Unit Share % Value (Rs lakh) Value Share%
HCL 92000 11.9 HCL 42900 18.6
Zenith 57595 7.4 Compaq 37300 16.2
Compaq 56475 7.3 Zenith 16960 7.4
HP 27000 3.5 ibm 14553 6.3
ibm 27000 3.5 HP 13369 5.8
Acer 26560 3.4 Acer 12598 5.5
Minicomp 25200 3.3 Wipro 8984 3.9
Wipro 23800 3.1 Siemens Nixdorf 6450 2.8
Vintron 15500 2.0 Vintron 4903 2.1
Siemens Nixdorf 13000 1.7 Minicomp 4284 1.9
Others 410615 53.0 Others 60834 26.4
Total 774745 Total 230099

Dell, Computech, Vel, CMS, DCM, Nexus, ERIL, Gateway, Tata
Elxsi, Apple, Micron & Melstar are included in Others.

Portable PC Vendor Share (1998-99)


Units Unit Share % Values (Rs Lakh) Value Share%
Compaq 5300 18.6 ibm 6597 22.7
ibm 4700 16.5 Compaq 5518 19.0
Toshiba 3900 13.7 Toshiba 5000 17.2
Acer 1130 4.0 Acer 1130 3.9
Dell 650 2.3 Dell 975 3.3
Siemens
Nixdorf
500 1.8 Siemens Nixdorf 500 1.7
Hewlett
Packard
350 1.2 Hewlett Packard 490 1.7
Others 12015 42.1 Others 8896 30.3
Total 29105 Total 29105

Apple is included in Others

 PC MARKET SEGMENTATION


1998-99 1997-98
Value (Rs lakh) Value Share % asv (Rs lakh) Value (Rs lakh) Value
Share %
asv (Rs lakh) Value Growth % Change in asv %
Desktops 230099 74.9 29700 214500 77.6 36670 7.3 -23.5
Portables 29105 9.5 100000 25800 9.3 100994 12.8 -1.0
PC Servers 47846 15.6 231308 36073 13.1 240631 32.6 -4.0
Total 307050 100.0 37239 276373 100.0 44185 11.1 -18.7

 

1998-99 1997-98
Units Unit
Share %
Units Unit
share %
Unit
Growth%
Desktops 774745 94.0 584947 93.5 32.4
Portables 29105 3.5 25546 4.1 13.9
PC
Servers
20685 2.5 14991 2.4 38
Total 824535 100 625284 100 31.8

 

Home PC Vendor Share (1998-99)


Vendor Units Unit Share % Value 
(Rs lakh)
Value Share%
HCL 18,235 9.1 7520 10.1
Zenith 18,034 9.0 6016 8.2
Compaq 7,214 3.6 5339 7.1
Vintron 4,609 2.3 1353 1.8
Wipro 3,807 1.9 1504 2.0
HP 801 0.4 451 0.6
Others 147685 73.7 52715 70.1
Total Home PCs 200,385 74898

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