The way Dataquest senior industry analyst Scott Miller sees it, New Zealand and the Asia-Pacific region, including Japan, are the places to watch in the near future.
“They are getting near price parity with the US,” he says. “Asia-Pacific, without Japan, will have 16% of the world PC market by the year 2000. Asia-Pacific’s PC market in 1996 grew by 24.5% in units with a sustainable growth of 24.7%.”
This compares to 13.6% growth in the North American PC market for 1996, which Dataquest predicts has a sustainable growth of 14.9%, and a world total growth of 19.1%, 17% of which is sustainable.
One of the reasons for Asia-Pacific’s growth surge is China. The PC market there grew 75% in the past quarter alone.
Another growth region is Eastern Europe, where the PC market grew by 30% to 40% this year and is expected to continue growing at a sustainable rate of 25%.
Miller says Dataquest recently conducted a phone survey of 555 small businesses (under 100 staff) in the US, talking only to headquarters of companies with branch operations, and found Compaq, Dell and IBM were the top three PC companies on the businesses’ list of companies from which they have or are planning to buy a computer.
Dataquest also found a lack of IS managers. Eighty-four per cent of those surveyed said they had no IS department or anyone employed fulltime as an IS manager. Of those businesses with fewer than 50 staff, only 5% had an IS manager.
PC makers are being forced into what Miller calls “the velocity business model” by ever tighter margins. Shrinking margins mean PC makers must maximise their inventory turns and compete on a cash basis.
“Those companies which have caught on in the past few years are Packard Bell, Dell and Gateway. Others such as Apple, Compaq and IBM are moving in the same direction in order to be able to compete. It is easier to do this if a company has a single, direct channel. HP is building to customer and channel order--it did that with the printer model and now it is trying to do it with its PCs. It takes time for this to catch on, but when it does, the company becomes a virtual store.
“Intel is making 15% price cuts possible. However, when something goes wrong the PC makers are left with no stock and therefore no money to pay bills.”
Miller believes Microsoft is also pushing PC prices down by working on a transaction model where the user pays for every bit they use on a PC--such as software and the Internet.
“They drive prices lower by saying ‘I don’t care what they cost. I make money on each transaction--therefore get lots of PCs out there.’ And the best way to do that is to sell them at low prices.”
Miller says Microsoft is undergoing something of a rejuvenation, probably due to competition from Netscape. He says one of the signs of this is that Microsoft is spending more on research and development as a percentage of sales than ever before.
“The bottom line is they’re spending money--like you wouldn’t believe.”
Dataquest has found the home market for PCs has been strong with a still-growing x86 market, but home computers in general have been held back by what Miller calls “the Apple effect”.
“Apple is going off a cliff,” says Miller. “The market is clearly depressed by Apple, which is still the number two consumer choice. The only upside is if Apple adjusts its pricing or if its buyers defect to another brand.”
Miller believes Apple’s performance in the next quarter is crucial to its future.
“I believe if Apple does not become a player this quarter then it will become irrelevant in the US consumer market.”
Taking another view of the market, he says handheld devices and network computers may be the way of the future for home computing but not in their current forms. “PC makers have to think of the social context--don’t think just because you have a great new device you’re going to change the way people behave. People are not going to substitute a computer for a TV.
“Another important thing is the interface. Instead of trying to throw everything that was in a PC into it maybe create a new class of product.”
Miller says the final consideration is price. The simplified home computer of the future will have to be as cheap as any other appliance or buyers will go ahead and save up to buy a PC, because they can do more on it and it is seen as value for money.