Notebook sales soar

It’s the form factor of choice for business and consumer users alike. Notebook sales continue to climb across the Middle East and major A-brand vendors are slugging it out for market share. Andrew Seymour reports.

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By  Andrew Seymour Published  November 21, 2006

Tipping point|~|khalilgt200.jpg|~|Ahmed Khalil, Toshiba|~|If you’re looking to identify a dominant theme from this year’s GITEX show then it’s a fair bet that mobile PCs will be in the running. The industry’s leading hardware vendors are all out in force, showcasing the latest notebook models that hold the key to their fortunes in 2007. But behind the wide smiles and glitzy exhibition stands resides the pressure of keeping pace with a fast-moving sector and establishing the channels that guarantee ongoing growth. Mobile PCs are rapidly becoming the dominant form factor in the Middle East and there are no signs of this trend being abated, especially after the regional notebook market increased an almighty 31% to 675,000 units in the second quarter. While computer traditionalists will argue that the desktop market is almost three times as large, the fact that it is growing at half the pace means the chasm between the two categories is narrowing. Recent data published by IDC confirmed that notebooks were the driving force of the GCC markets in 2005 with shipments shooting up by more than 75% and accounting for 48% of total market volume. That trend is expected to be even more pronounced this year. “The flexibility notebooks afford is now seen as essential to business in the region,” said Omar Shihab, research manager PCs and systems at IDC’s Middle East office. “Small and home offices and SMB businesses in particular invested heavily in portables and will continue to do so, especially as wireless technology makes mobility a growing reality.” In markets such as Saudi, notebook sales are even outstripping desktop sales by a considerable margin, offering a glimpse of what is likely to happen to other countries in the region as internet and broadband penetration increases. Mathew Thomas, head of IT for MEA, Turkey and CIS at distributor Redington, cites Saudi Arabia, UAE, Qatar and Kuwait as the hottest markets for notebooks at the moment. “There is a fairly decent population in these countries and the general economy is strong — mainly because of the oil prices, government spending, events such as the Asian games in Qatar, and investment in retail. The cost of connectivity is also coming down, which is another reason that these few countries are doing well.” Toshiba, the third largest notebook PC producer in MEA in the second quarter with a market share of 16%, grew unit sales 11% year-on-year to more than 100,000 units, and regional boss Ahmed Khalil admits the emphasis is on scaling with the market. He explained: “In Europe the challenge is to keep the same numbers and revenue as last year, but here it is how to grow faster in a really fast growing market. It requires a slightly different mindset. I expect the Middle East to grow around 60% year-on-year in notebook PCs. That is our expectation for the fourth quarter, and on average for 2007,” he added. Khalid Wani, channel manager at Lenovo Middle East, hails Saudi and the UAE as key markets, but warns that each geography must be treated on its own merits. “The market size for Saudi is far bigger than UAE, but UAE has become a tangible hub because of its flexible infrastructure. A lot of fulfillment happens from there so the market dynamics are more complex than what you have in Saudi. In the notebook industry, Saudi is primarily seeing a lot of movement on the consumer arena so the strategy that you would probably adopt would be slightly different to what you would in UAE. And if you compared it with Bahrain, for example, it would be a different strategy again because over there you still have a lot of growth to come from the consumer segment. The financial and banking sector is booming there too.” Notebook resellers looking to make additional income beyond the box need to consider selling complementary products, such as web cams, external storage devices and software, alongside the notebook. “A smart reseller is able to sell the features of the notebook which will solve business problems and it will be able to basically sell the customer things which add value to the product and the experience,” said Anil Gandhi, general manager PSG at HP Middle East. “For example, if you are going to go on a long flight, you want a notebook which can last eight or nine hours. We sell accessories that allow the notebook to work for nine hours at a stretch. In a home office setting or even in the office you could sell a smart docking solution to the customer, which would then give you an opportunity to sell devices that can connect to the docking station like printers and LCD panels.” Lenovo insists it is also eager to boost add-on sales among notebook partners. “We are working strongly to ensure that our attach rate on the other peripherals that we offer improves,” said Wani. “We initially had a limited portfolio of peripherals that could go along with a notebook, but over the past couple of months we have added a lot of new products and are promoting a lot of value-added bundles for the resellers to make some additional bucks.” One distinctive aspect of the notebook market is that the consumer and corporate sector remain very different beasts, requiring vendors to adopt a separate strategy to tame each one. “If you are selling in the notebook space you really have to offer the full bandwidth of products,” agreed Sascha Haake, director SME and channel at Fujitsu Siemens Middle East. “On the one hand you must have the consumer products with gaming capabilities and other features, and on the other you need the professional perspective that goes from an entry-level price performance notebook up to the high end tablet PC convertible notebook.” ||**||Price points|~|anilggt200.jpg|~|Anil Gandhi|~|The notebook market in the Middle East is already divided into multiple price bands, from US$500 low-end devices up to US$9,000 models containing the latest technology. Pricing remains a sensitive issue in the market, particularly with the sharp descent of average selling prices. Some vendors, such as Sony, claim they have put mechanisms in place to prevent partners from instigating a price war. “The price control across all VAIO selling outlets is strictly maintained,” insisted Dhamendra Lalai, senior manager at Sony’s IT marketing department. “This ensures that consumers can focus on buying VAIO from a place of their liking without fear of finding it cheaper elsewhere and channel partners focus on providing the value added buying experience to the customer without wasting time on complex price negotiations.” While growth in the commercial sector is considered steady and more predictable, the consumer market is recognised as the catalyst for the current peak in demand. With the fourth quarter now in full swing, the conversation in the consumer notebook sector has again turned to the subject of how quickly the market is growing. Developments in the region’s retail channel have put many vendors in good heart. Khalil at Toshiba said: “More professional retailers are opening, especially in Saudi Arabia. Whereas one retailer like Jarir dominated the market for a long time, there are now many other retailers coming in, such as Extra. Carrefour is opening up across the Middle East and that also fuels demand because it displays the product in the right way and has the right floor sales people to demonstrate the product.” Not everybody is keen to court the low-price customers that are associated with the volume retail channel, however. Lalai at Sony acknowledges that a substantial chunk of notebook growth stems from new adopters of mobile PCs that simply want basic internet access and home computing, but he added: “For these customers economy is critical as long as the performance is delivered. At Sony we are consciously staying away from this segment because consumers expect a lot more from a Sony VAIO than cheap price and a very basic level of performance.” Selling notebooks into the enterprise sector requires an entirely different go-to-market approach, both for vendors and the channel. While the European and US markets have come to rely on the large corporate sector for a big chunk of laptop growth, the same can’t be said of the Middle East. “One reason I can think of is the fact that there aren’t too many corporations belonging to the region which can be called enterprise customers,” observed Gandhi. “The second reason, which is somehow related, is that most of the large corporations which buy notebooks for their employees are multinational companies and that, by definition, limits the number of companies who do this. Thirdly, some of what constitutes the enterprise segment in the Middle East is really owned by the government. Culturally, the public sector everywhere is reluctant to let their employees walk out at the end of the day with a company asset and company data.” One vertical sector that remains at the forefront of notebook adoption is education. “The education sectors in the Middle East were reasonably early adopters of a notebook strategy — with the Notebooks for Students initiative — and that is only gaining momentum,” said Michael Collins, general manager MEA at PC giant Dell. “It started off a few years ago when some of the larger universities began piloting the concept of standardising on notebook technology in the classroom and then writing curriculums around it. Now they have applications that give them all mediums — visual, text, voice — and students are able to learn outside the classroom with downloadable material,” he adds. On top of the technical attributes that make a laptop attractive is the issue of the brand itself. In the second quarter, just 12% of MEA notebook sales — roughly 84,000 pieces — were made by whitebox producers, emphasising just how quickly the market has been concentrated into the hands of a few global players. “We firmly believe that brand is the biggest qualifier in the market,” said Thomas at Redington. “Price does play an important role, mainly in the corporate sector where the large deals are being done. But in the SMB sector, brand certainly plays a bigger role.” Local players also lack the big marketing budgets to compete with the global notebook providers, argues Gandhi at HP. “Marketing is a very expensive game and smaller companies, or local assemblers, can’t really bring their message to the market as effectively or as pervasively as a company like HP can,” he said. One company attempting to dispel the view that the whitebox model is becoming redundant is components distributor eSys, which is preparing to launch its own notebook range. According to MEA director Pavan Gupta, eSys will attempt to exploit its purchasing power and reseller channel to provide a compelling and affordable notebook proposition for partners. Gupta believes there is a gap in the market that eSys can fill. With vendors competing closely on prices and specifications, those offering an attractive combination of margin, pricing, availability and usability will win the Middle East laptop battle. ||**||

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