CRN Special Report: Notebooks

May 2005 was the first month ever where notebook computers outsold desktops consistently for a whole month in the US, with notebooks making up 53 percent of the total personal computer market.

In Australia’s corporate market, desktops are still the dominant form factor according to GfK Australia’s market research.

“In November 2004 it was 70:30 desktops versus notebooks, but since then there’s been an acceleration to the point where it’s 56:44 in favour of desktops,” says GfK’s account manager Neville Ray.

In the retail space however, notebooks and desktops crossed over in November 2004 when notebooks became the dominant form factor, he says.

And that has continued. “In March and April 2005 notebooks accounted for 55 percent of the market and desktops accounted for 45 percent. That’s in terms of volume percentage through retail,” he says.

From January to April this year, 56 percent of notebooks sold were below $2200 and 19 percent were sub-$1400, says Ray.

HP/Compaq (37 percent) and Toshiba (24 percent) slogged it out for number one and number two in terms of units sold. LG showed its ticker by going from near nothing to taking around 10 percent of the retail market in just little over a year, he says.

But all that was before May’s sub-$1000 price war, when the likes of Acer went all-out gutting notebook prices and Harvey Norman started selling “ex-lease” notebooks for $787.

IDC research compared the home/consumer notebook market with the commercial market for Q1 this year. In terms of units sold, the consumer sector was around 62 percent for desktops and 38 percent for notebooks.

In the commercial sector, 71 percent for desktops and 29 percent for notebooks, according to Jean-Marc Annonier, research manager IT spending at IDC.

“In terms of value/revenue, the consumer sector was 54 percent desktops and notebooks 46 percent. The commercial sector was 63 percent for desktops and 37 percent for notebooks.”

The top 3 notebook vendors locally Q1 2005, ranked according to the number of units sold were HP, Toshiba and Dell, says Annonier.

In terms of revenue or market value, there was a slight shuffle with Toshiba first, then HP and Dell.

Toshiba’s product marketing manager Matt Codrington says it will not be until the end of 2006 until we see the notebook replacing the desktop 1:1. “We’re shipping a lot more units than we were, but the revenue growth doesn’t reflect the unit growth, and that’s due to the decline in the average notebook price,” he says.

ASUS has ramped up its notebook push considerably since it established a local office a year ago with one employee. Now the company has 26 local employees and will double that by the end of the year, says the director of ASUS Australia, Ted Chen.

“We all acknowledge that the market is getting tougher and tougher. The margins are getting smaller and smaller. That’s why a lot of the vendors are starting to take over the tender of corporate bids or go direct to sales to the end user, and this is why existing channel partners are starting to feel insecure. While this may be other company’s strategies, ASUS will stick to the traditional channel, that’s our core strategy,” Chen says.

He says some channel partners feel they have faithfully courted customers for a long time but now the vendor is taking them away.

“No-one feels comfortable. But we cherish our partnerships. We’ll stick to traditional channel structures…and I guarantee that ASUS will never take our partners’ customers away. We support our dealers and we respect the channel relationship,” Chen says.

ASUS also looks after its notebook customers. In June, the company launched a “luxurious service centre” in Melbourne as part of having that facility in all major capitals.

“Our VIP lounge [service centre] is better than the Qantas lounge. Our centre is to service customers that need emergency notebook repairs. If they don’t want to wait for our courier pickup and return repair service, they can come to the service centre. Here there’s 120-inch big screens, free net, lounges, tea and coffee, and friendly face-to-face service by engineers who will repair your notebook in front of you within two hours,” he says.

Chen says ASUS was recently ranked number seven in Australia but aims to be in the top five by the end of this year. “We’ve only been here a year, so it’s a very challenging goal.”

The SMB market is showing healthy demand for notebooks, with a third saying notebooks were their top technology priority.

AMD’s senior marketing executive for Australia/New Zealand, Caroline Francis, quotes research released this year by HP and Harris Interactive that showed 36 percent of SMBs felt notebooks allowed them to stay competitive with their larger businesses.

A further 36 percent planned to incorporate notebooks within their technology suite within the next year. Sales of accessories linked to notebook purchases is growing much faster than sales of accessories related to desktop purchases, says Logitech’s general manager Marco Manera. “We’re seeing growth well in excess of 50 percent,” he says.

As far as notebooks go, the biggest growth in sales is in the under-$1999 price point. Samsung’s notebook product manager Steve Trang says sales of notebooks above $2000 have slowed down.

Despite this trend, Sony which plays in the higher-end market, says sales of its VAIO notebook grew 22 percent between Q4 2004 and Q1 2005, according to VAIO’s business manager Gordon Kerr.

There seems to be two halves to the notebook market. On the one hand there’s the super aggressive, low price points driven by the likes of Acer and Dell. “And then there is the newly established market with a broader feature set which are now becoming very competitive and offer far more broader products than they used to,” says BenQ Australia’s managing director, Philip Newton. “Things like wide screens, gloss screens, independent graphics, longer battery life, Sonoma, expanded memory have all popped up in the past six months.”

BenQ is in the process of tweaking some of its notebooks in direct response to feedback from its customers. “We’ve worked with focus groups, BenQ authorised partners and consumers who are buying the products in 50 sites around the country. Their needs are very clear, for example, they want 512MB of memory and DVD burner.”

In July, BenQ’s entry-level product will include a DVD burner and 512MB of memory. “It’s somewhat unusual but it’s what the market is demanding. Whether they use them or not is another thing but that’s what they’re asking for, along with bigger and brighter, clearer screens.” Newton says CPU speeds seems to have gone by the wayside to a certain extent, whereas a year ago Pentium 4 was driving that space.

Market sectors experiencing strong uptake of notebooks include education, finance and home lending, consultancies, tax agents and number crunchers.

Acer’s senior notebook and Tablet product manager, Antonio Leone, says widescreens, advances in storage media, and built-in DVD burners are contributing to notebooks growing in popularity and becoming mainstream.

Competition between notebook vendors has gone up a few notches this year, he says. “I’m seeing the notebook market more fiercely contested than other product segments. With more people using notebooks, you’ve got more people wanting to use projectors, portable printers, other portable storage devices, a lot of USB-based storage solutions and also security accessories.”