Jittery money markets blow cool wind through IT industry

The fall of the New Zealand dollar - and the Asian financial crisis - are producing an air of caution and uncertainty in the IT industry for the start of 1998. Vendors reported a good, steady Christmas, but nothing spectacular. It followed a year which included several receiver-ships (Best Buy, PC General and Lowes Technology) and significant lay-offs (Renaissance - 40). The closure of PC General had a positive effect for some others, but IDC manager Graham Penn describes it as a "quiet-ish" Christmas, with no compelling reason to buy. He is still forecasting tough times ahead. He expects more business closures by February, and further rationalisation amongst distributors.

The fall of the New Zealand dollar — and the Asian financial crisis — are producing an air of caution and uncertainty in the IT industry for the start of 1998.

Vendors reported a good, steady Christmas, but nothing spectacular. It followed a year which included several receiver-ships (Best Buy, PC General and Lowes Technology) and significant lay-offs (Renaissance — 40).

The closure of PC General had a positive effect for some. HP, which reported a good Christmas, noticed stronger sales in Wellington and Christchurch than in Auckland.

Pacific Retail Group (which includes Noel Leeming and Computer City) noticed an upturn in business as soon as some assemblers started closing.

IDC manager Graham Penn describes it as a “quiet-ish” Christmas, with no compelling reason to buy.

He is still forecasting tough times ahead. He expects more business closures by February, and further rationalisation amongst distributors.

“We know that Ingram is coming in with its joint purchase of Electronic Resources. That will put more pressure on all the other distributors as well, some of whom are marginally in business anyway ... When the elephants play, the insects get trodden on.”

He says the corporate market will be very quiet, with uncertainty about the Asian crisis and our currency causing caution about spending on non-essential IT.

HP PC marketing manager Joanna Burgess, talking about the the corporate market, also predicts little growth in that sector.

Burgess says HP “should have” increased prices in response to the falling dollar but hadn’t, in order to remain competitive.

She says that will continue to be evaluated and HP will of course watch its competition. Price rises could occur, but it’s hard to predict because of the exchange rate uncertainty.

In the home PC market, HP retail business manager Mike Carden is “bullish” about 1998.

He believes if the exchange rate does affect pricing, we’ll see PC prices remain the same rather than increases.

Pacific Retail Group managing director Greg Lancaster predicts price rises will occur.

“But a lot of these things are assembled in Asia so it’s really up in the air. We don’t know whether we’re going to see cheaper export prices out of those countries to offset the fall in the Kiwi or not.”

In the US, Dell has cut prices to some PCs because of Asia (where most of its components originate), but that is unlikely here.

Dell NZ general manager Ross Allan says there are lower costs because of the crisis, but there are also increases because of the Kiwi dollar falling.

Penn says there will be attractive price points at the bottom of the PC market in 1988, but he doesn’t expect a robust year.

“For the number of resellers and distributors that are around, given falling sales and margins, there won’t be much business.”

He says it’s difficult for smaller dealers and resellers to get credit from distributors now, making it hard for anyone new to enter the market.

New Zealand Software Association president John Ball says New Zealand software exporters do little in Asia, but it was growing until the crisis.

“People who do work in that area are just having to move their energy to other areas. ”

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