Exchange rates are one of the biggest challenges the industry is facing at the moment, while a dip in PC sales and pricing pressures are making the market more competitive. Jade Burke delves a little deeper into these issues...
With PC sales declining and the frequent change in exchange rates, PC vendors, resellers and distributors are preparing themselves for a tough 2015.
Due to these unfavourable currency rates, demand for PCs is constrained and sales are falling. Analyst IDC reported a 7.7 per cent year-on-year decline in EMEA PC shipments in Q1 2015 and shipments reached 20.2 million units due to business renewals decelerating after last year’s uplift around Windows XP support.
With vendors focusing on depleting attractively priced Bing inventory built up during Q4 2014, difficult currency exchange rates and an increase in prices of components, this led to a rise in average selling prices for PCs across EMEA overall.
The rise came about as vendors attempted to offset the impact from euro/dollar exchange rate pressures. And it’s not going to get any easier.
“We can expect a bigger currency impact in the second quarter of 2015, with professional PC prices expected to increase more than in the consumer PC market,” says Ranjit Atwal, research director at Gartner.
The news comes as tech giant Intel revealed an eight per cent drop in revenues in its desktop and mobile computing business to $7.4 billion in Q1 2015. CEO Brian Krzanich said this dip was due to a lower than expected demand for business desktop PCs.
This drop in sales – 5.2 per cent in Q1 overall according to Gartner – is making the market more competitive. “In the consumer market, manufacturers will lower the specifications of PCs to keep their prices competitive,” adds Atwal.
According to IDC, computer manufacturers are now also dropping prices of many premium PCs in a bid to grab greater marketshare.
Jay Chou, senior research analyst, worldwide PC trackers, at IDC, comments: “The market unfortunately remains heavily dependent on pricing being a major driver, with entry SKU volume masking a still tenuous demand for higher priced systems that is needed to sustain a more diverse PC ecosystem. Pricing pressure is bringing many premium SKUs into formerly mid- level pricing tiers. As more vendors find it increasingly difficult to compete, we can expect additional consolidation in the PC market.”
Some companies have maintained their market position, including Lenovo, which held on to the top spot during Q1 2015 with a 19.6 per cent share of the global PC market. And there are positive signs for the future with Windows 10 approaching.
Rajani Singh, senior research analyst at IDC, explains: “Windows 10 should be a net positive as there is pent-up demand for replacements of older PCs.”
However, it might not be plain sailing. VIP Computer’s director Rich Marsden says: “Windows 10 as a free upgrade will create another challenge. In a market that is always tough, the removal of this revenue stream will hit the industry hard.”
But let’s not forget: PC sales were resilient last year, and there is still time for a resurgence in 2015.
Trade faces rate threat
UK vendors and tech firms give PCR their thoughts on the challenges of exchange rates.
”The frequent and rapid changes of exchange rates are a big challenge. We need to find the best way to deal with this development in the marketplace.”
Paul Butler, regional sales director,
AOC and Philips/MMD
”One of the biggest challenges this year is volatile pricing in the channel due to exchange rates. This can make it really hard to forecast and deliver a stable pricing structure.”
Martin Kent, territory manager,
”As well as grey market dumping, we have also seen huge challenges in currency fluctuations with both the US dollar going from nearly $1.70 to $1.46 to the pound. With the Euro going the opposite way, this can impact demand, specifically making many Euro-based suppliers competitive.”
Ged Mitchell, MD,
”One minute notebooks are down and tablets are growing, then smartphones grow and tablets are down and now notebook sales are picking up.”
Chris Connell, head of sales, B2C division,
”The biggest challenge is the dollar rate pushing
up the buying price, giving us and other companies a lower margin to work with.”
Steven Levitt, marketing specialist,