Others may follow PC General

Local assemblers selling only on price could soon find themselves under pressure in the wake of PC General's receivership, says IDC research analyst Graham Penn. Penn says the PC General receivership wasn't a surprise, although he hadn't predicted when it would happen. "Just observing the market, you would come to the conclusion: 'Well, those guys are probably under a bit of pressure.'

Local assemblers selling only on price could soon find themselves under pressure in the wake of PC General’s receivership, says IDC research analyst Graham Penn.

The New Zealand-based assembler ceased trading last Tuesday. PC General’s David Sinclair told suppliers difficult trading conditions made it imprudent for the company to continue trading.

“Before making this decision the board considered all viable options to enhance the company’s performance or sell the business as a going concern,” he said in a fax to suppliers. As Computerworld went to press it was still unclear whether the receiver would allow the company to continue to trade.

In the message to suppliers, Sinclair says the company’s solicitors would inform the company’s debenture holder of the board of directors’ decision, and “the receiver may or may not” allow the company to continue to trade.

Penn says the PC General receivership wasn’t a surprise, although he hadn’t predicted when it would happen.

“Just observing the market, you would come to the conclusion: ‘Well, those guys are probably under a bit of pressure.’

“Over the past few months they had been trying to move as much product as possible, presumably just to generate cash. The trouble is, that becomes a downward spiral.”

Penn says that without naming names, other local assemblers will be under pressure. “Some will just go gracefully and close the doors and quietly fade away. Others — particularly if they’re a high-profile company — tend to capture more of the headlines. But it is a tough market. Selling PCs is no licence to print money.”

Penn says there are many viable assemblers, but he believes the days are numbered for those selling only on price.

“The message is really not that you can’t do business with this local assembler, or that local assembler, but understand which part of the business he’s in.

“Make sure he’s actually adding value and not just selling products at the cheapest possible price, because that’s not a recipe for longevity.”

He says small local assemblers are being put under pressure around the world. The capacity to supply is greater than demand for PCs. “That means there are too many players in all parts of the market. But we haven’t had a spectacular failure for a little while. We’ve had PC Power in Auckland get into a certain amount of difficulty, but PC General has a higher profile than PC Power, and it’s been in business longer.”

Consumers’ Institute head David Russell says the fact a company which has been around as long as PC General could close reflects the volatility of the computer market.

He says that under the new Companies Act, directors of companies could be held liable if it could be shown that they continued to trade and promote the company, knowing that it was insolvent.

His advice to consumers was never to pay before receiving the goods.

He had received one call from a PC General customer who was delighted he had taken that advice from the Consumers Institute earlier in the week.

As Computerworld went to press, it was announced that Stephen Tubbs of Searell and Co in Christchurch had been appointed receiver. Tubbs was unable to be contacted before deadline.

The announcement followed a day of confusion on Wednesday, when suppliers and customers were having no success in finding out the name of the receiver.

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