On the home straight

Expectations in the market are beginning to rise as the fourth quarter gets into full swing, says Andrew Seymour.

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By  Andrew Seymour Published  October 7, 2007

Expectations in the market are beginning to rise as the fourth quarter gets into full swing. The final three months of the year occupy a pivotal role in the seasonal calendar and will undoubtedly play host to the usual aggressive sales activity from vendors and channel players aiming to consolidate their positions ahead of year-end.

Optimism levels seem to be peaking again after what resellers describe as a fairly sluggish few weeks. The inevitable post-Gitex slowdown, coupled with the start of Ramadan, has understandably led to something of a pinch as far as demand goes. Naturally, this has put a strain on cashflow although resellers down on Computer Street insist the implications have been less severe than in the past. Sources claim the culture of dramatic price-cutting that has typically accompanied such a challenging trading environment haven't been as visible - except with notoriously price-volatile product lines such as LCD screens - suggesting that a more responsible attitude to profit-making could be filtering down.

The issue of financial management is one that is sure to be given ample attention when the recently-formed Dubai Computer Traders Group (DCTG) holds its first general assembly at a yet-to-be-decided date in the next few weeks. Its inauguration comes at a time when credit availability remains a hotly-debated subject in the reseller channel.

Channel sources suggest that Tech Data's withdrawal from the Middle East has sparked a more circumspect policy towards lending by other distributors, while banks in general continue to treat the IT trading community with a level of caution that merely serves to frustrate resellers. In some cases, those involved with fast-moving consumer goods -such as certain electronics lines - are facing the ludicrous situation of moving products so quickly that they use their whole month's credit in the first week and subsequently can't secure anymore.

But while some resellers criticise distributors for not being generous enough, others insist that more prudence is required to prevent further credit-induced casualties. Whether it's dealers being offered overly-large credit lines that place them on the rocky path to financial ruin or rogue resellers who gain credit lines established on cash and then vanish after building up a small fortune, the DCTG will clearly have an important role to play in defining the steps that need to be taken to promote healthy financial management. The recent case involving components reseller Disk and Drive, which fled Dubai after less than a year in the business, continues to serve as a delicate reminder of how perilously the market is often balanced.

I also understand that the DCTG intends to host regular individual meetings with the top brands, starting with Microsoft, in an effort to forge closer ties between suppliers and the reseller community. There's no doubt that relations between resellers and certain brands have come under pressure for a variety of reasons in the last few years. Whether it's concerns over account management procedures or their ability to draw a distinction between traders and power retailers, the point is that numerous areas need addressing for the mutual health of both parties.

Speaking of vendors, Western Digital's EMEA VP for branded products Didier Trassaert was in town last week, exploring the possibility of how to strengthen the vendor's branded business in the Middle East. The company now earns more than US$200 million a quarter from the global sale of branded products, which largely includes external products that aren't integrated by an OEM.

Making the rather liberal assumption that the EMEA market contributes 30% of that US$200m - around US$65m - and the MEA portion represents a further 5% - or US$3m-plus - then surely the decision of whether to add new staff or resources is a foregone conclusion.

Clearly, Western Digital and other like-minded companies need to act decisively when it comes to putting the necessary additions in place, rather than just speaking about how committed they are to the market. The diversity of the retail channel, which is now more about the products that fit round the PC rather than the PC itself, calls for meaningful vendor involvement and branding efforts. Category management is a phrase that is persistently cropping up in the retail sector these days, and it's the responsibility of vendors such as Western Digital to support that by putting their money where their mouth is.

Meanwhile, four software traders in Oman have become the latest casualties of Microsoft's efforts to crack down on piracy in the Middle East channel. The quartet all agreed to out-of-court-settlements after being fingered by the ever-alert Business Software Alliance for allegedly soliciting pirated software.

Interestingly, the raids are some of the first outside the UAE that Microsoft has publicised. Until now, the vendor has largely opted to highlight the fruits of its investigations in the UAE, where it has to be said that its efforts are supported by a government that take a serious view of IP breaches. However, if Microsoft's crusade is to be taken seriously then it must be seen to be taking action in the major markets of Egypt and Saudi Arabia where the battle is tougher, but arguably much bigger. What better time than in the fourth quarter when the Middle East market is just picking up momentum?

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