Notebook prices in freefall

Notebooks have been the most attractive segment of the PC business for quite a while, with better margins for vendors, and an increasing demand from consumers and business buyers alike.

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By  Mark Sutton Published  October 11, 2003

Notebooks have been the most attractive segment of the PC business for quite a while, with better margins for vendors, and an increasing demand from consumers and business buyers alike.

But although notebooks are still the fastest growing segment both in the Middle East and in the wider EMEA region, the latest figures from IDC spell out the reality behind this booming market—notebook prices are in freefall, and don’t show any sign of recovery.

For the EMEA region as a whole, consumer sales of notebooks are predicted to have grown by 50% for the third quarter 2003 compared to the same quarter last year. Mostly this growth has been driven by aggressive pricing to create demand among consumers, who currently account for the majority of notebook sales.

Alongside aggressive marketing and pricing, many vendors also used price cuts to clear stocks before introducing new Centrino models. The overall effect of all this price-cutting has been a drop in average pricing of 25% year-on-year, with a slump of over 10% just from the second quarter to the third.

The situation won’t be helped by the entry of several new players in the notebook market, and an increasing interest in notebook assembly from local white box builders. What had looked like being a solid segment where margins were still healthy could be about to suffer the same sort of problems that the desktop faced in past years if prices continue to decline, and there is no sign that pricing will recover.

One of the possible breaks that some vendors were looking for was the introduction of Centrino. With a new technology, particularly one that originally looked towards business users, the vendors hoped to be able to stabilise prices. Unfortunately, business buyers have not proven to be as quick to adopt Centrino as consumers have—Centrino is proving popular, but with the wrong buyers.

This has meant that the vendors have had to introduce Centrino technology across the board, from the high end down to entry-level notebooks. The more lucrative business models may have retained some pricing levels through the efforts of certain vendors, but with no great boom in business spending expected until well into 2004, these models are selling in significant numbers, certainly not enough to stabilise the market.

In the mean time, it is still the consumer that drives notebook sales, and the consumers are still looking for the best deal. With the holiday period approaching, consumers will be looking for even more deals on prices, and manufacturers chasing the a decent share of year-end spending are likely to oblige. Which, of course, puts the resellers right back in the grim situation of chasing volumes to make up what they have lost on their margins.

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