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.”The sub-$1000 notebook phenomenon is gaining momentum, with notebooks being sold for between $787 and $999 in places like Big W and Harvey Norman.
In terms of the future for notebooks, it poses a lot of issues for resellers.
GfK’s Ray says if it continues like this, then notebooks will become almost a commodity item. “If you look at indications in Europe, we’re seeing notebooks sold through different retail channels, like groceries.”
“About 30 percent of notebooks in Germany are reportedly sold through grocery retailers. It’s quite frightening for the IT industry. That’s a step that could happen here and possibly will, especially at the low end,” he says.
Newton says there has been a very mixed response to Acer’s sub-$1000 notebook blitz. “Some are horrified by it and others really don’t seem to care too much; it’s a real polarised response we hear, there’s no-one in the middle.”
He says those that are not threatened have pretty well-established businesses, which are running well and meeting their customers’ demands.
“We don’t do stunts with notebooks. We don’t do what Acer has done with its $999 or $997 product, which is essentially driving for numbers. We’re not interested in that. We’re more interested in building a long-term viable business and that is essentially driven by consumer demand. For example, we’re bringing in Sonoma early and bringing in DVD burners early in response to that demand,” Newton says.
Notebook specialist resellers are looking at the sub-$1000 trend with some apprehension. Andrew Humphreys of Melbourne reseller City Notebook Centre (CNC) says prices are getting slashed to barely nothing due to a lot of competitors deciding to “gut the price and go on bulk”.
The vicious price cutting is not something they can ignore. “Every Thursday in The Age they have the Green Guide. From our perspective, the prices on some of the notebooks advertised in there, I swear they’d be lucky to make $10 on them. They’re selling on price but make nothing on them. It makes it harder for everyone else, and it’s unfortunate for us because we’re only a small business,” he says.
CNC has been around for 15 years and Humphreys says that ultimately you just do what you can do to make yourself stand out.
“We have a laptop service agreement that we provide with our sales on notebooks, and we’re pretty much the only people in Melbourne that I know that do this. If you purchase a notebook from us, we offer free support for the first year.”
Acer had a fairly mild response to the question of how its push for sub-$1000 notebooks direct to the consumer market impacts on resellers.
“They can differentiate and add value at the point of sale by offering their own repair services and integration services,” says Acer’s Leone.
The fierce price competition first appeared in the pre back-to-school months of January and February and Sony is watching with interest as it rears its head again.
While Sony does not play in the low-end, Kerr says it is a very fast growing market and is really driving the notebook market.
“It’s assisting everyone,” he says. “The reason for having the sub-$1000 notebook is to expand the market, expand interest.” The issue is, if traditionally you were selling laptops at $2000- $3000 you cannot afford to shift everyone down to $1000 laptops. If you shift down to that, you have to sell four times the number of laptops, quadruple your efficiency to make the same amount of money, he says.
“Do I think the sub-$1000 notebook is a good thing? Yes, I do. It opens up the idea that people can own a notebook. And while they may buy a $999 notebook this time, when they’ve outgrown this one, in six months or a year’s time, that’s when you can move them to a $2000 or $3000 model,” Kerr says.
As notebooks are increasingly being used as desktop replacements, the need for security is intensified. Vendors are now looking for advanced ways to protect their products and differentiate themselves from the competition.
To this end, Optima is currently looking at incorporating built-in finger print readers and BIOS passwords to prevent the PC from booting without a password and to stop unauthorised users from changing the BIOS settings.
Lee says the company is also strengthening the physical protection of the unit with Kensington lock slots that use either numeric locks or key locks.
"Kensington locks are popular and widespread in the notebook market as they act as a simple deterrent for opportunistic thieves.
“However, BIOS passwords offer even greater protection for notebooks, preventing unauthorised users from booting to Windows without a password. For would be thieves that are unable to crack the system, these stolen machines have zero value.”
Lee says Seagate has also just announced a new series of HDD that features hardware-based encryption technology, which makes the information within the HDD useless or unreadable if thieves get their grubby mits on it.
“The enabling and disabling of the HD-based encryption feature can be controlled by the corporate network, making it totally invisible to the end user of the notebook. Soon notebooks may also include motion detection and alert features…so the notebook would sound an alarm if moved from a stationary position,” Lee says.
The only problem will be remembering that particular feature at the end of the day in the rush to beer-o’clock.
Toshiba is using fingerprint security in some of its models. Codrington says biometrics will play an increased role in notebook security in the next six to 12 months, which will appeal to security conscious executives, SOHOs and SMEs alike.
Backup is also very important and Toshiba has a number of different options for data collection, backup and data management and storage.
“We have technology built in the hard drive to protect the data on the primary drive, and we’ve developed the software RAID on our business notebooks. Our business notebooks also have a select drive where you can take out the optical disk drive and plug in a hard disk drive through a bay and this can be either a weekly or monthly occurrence to back up the data,” he says.
Toshiba also has a notebook security concept called Easyguard. “It’s about making technology durable and reliable. There’s continued advances there in terms of hard drive protection, or software RAID,” he says.
Acer is looking at a software-based utility that locks down the use of certain I/O ports on the notebook. Leone says this is great for corporate customers.
“People load MP3 files or other undesirables on their workstations in the office. So by providing the software-based lockout they can’t copy things onto external devices or import them onto their notebooks. That’s definitely a good measure particularly where there’s a lot of data sensitivity in the government and corporate spaces,” he says.
Wireless security is also high on the agenda in terms of notebook security.
Pacific Data, an Australian-owned security specialist distributor, is the exclusive distributor of AirDefence Wireless Intrusion Detection and Prevention.
Pacific Data’s sales and business development manager, Phillip Lay, says having launched AirDefence at the Sydney Wi-Fi Expo in 2005, the company is seeing an exponential increase in demand from corporate enterprises to secure the Wi-Fi devices such as the corporate fleet of Intel Centrino Wi-Fi-enabled notebooks.
“AirDefence secures mobile laptops from wireless security threats especially when travelling beyond the secure boundaries of the corporate firewall -- a la wireless hotspots at cafes, hotels and airports,” Lay says.
Just when you think wireless security issues are being ironed out, threats like “evil twin” or “wi-phishing” make everyone paranoid all over again.
Pacific Data says “evil twin” is where wireless hotspots look normal and appear like the real thing to someone using them, but in fact is a fake.
A hacker hiding nearby sends out a wireless signal that looks like a “legitimate” one, but as soon as you log on, the hacker has full unbridled access to your notebook.
On the horizon
Logitech’s market research from the US shows that the average “basket size” -- accessories sold as part of the same invoice as a desktop -- is around US$200. “What’s a bit of a worry for resellers is that for notebooks, it’s still much lower, about half that at US$100,” Manera says.
While this research was carried out in the US, Manera says it is probably quite an accurate reflection of the Australian market as well.
What is not certain is how much of that boils down to customers’ ignorance or a lazy sale technique.
Manera says one of the things that is really booming for notebooks now is internet communication such as headsets, notebook cameras, things that people are using for VoIP and videoconferencing, but very few resellers showcase these solutions.
“If the customer saw the headset hanging there next to the notebook, the average person may not make the link between that headset and [VoIP] Skype.” But if the reseller demonstrates it, then it will makes sense to the customer and quite likely result in a sale, he says.
While popular peripherals include the notebook mouse and cordless full size keyboards, Manera says in the next 12 months, we’ll see Bluetooth, video communications and VoIP applications, USB headsets, webcams and, due to the MP3 craze, portable speakers.
Lenovo’s offerings manager, David Nicol, agrees there is significant opportunity for resellers to wrap a wide range of products around the notebook sale: “For example, in the business and government marketplace, things like our ThinkVantage technologies; the security chip; Rescue and Recovery (which is a backup and recovery tool); and access connections which simplifies connectivity to wireless networks.”
The notebook market in the next 12 months is going to get tougher, and Toshiba’s Codrington says resellers can keep ahead of the game by being well-prepared and well-educated. “They need to make sure they’re a little bit diverse in terms of their customer base and they need to be up to date with the technology.”
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