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IDC: Government Investment Programs and Intensifying Competitive and Pricing Pressure Will Continue to Boost the Portuguese PC Market

Ahead of forecast, the Portuguese PC market displayed outstanding results in the fourth quarter of 2007, with shipments growing by 71.6% year-on-year, the highest growth in Western Europe. Hosting the EU presidency in the second half of 2007, Portugal started to implement its "Technological Plan", which, in the spirit of the Lisbon Strategy, promotes the development of growth and competitiveness, based on knowledge, technology, and innovation. Technology investments had a positive impact on PC shipments in 2007, stimulating overall PC market growth of 32.7% for the full year. IDC believes that further initiatives will continue to contribute to market expansion in 2008, when PC market growth is forecast to reach 39.0%.

"Following a soft start to the year, the Portuguese PC market experienced a strong rebound in the second half thanks to the government's "e.escolas" program", said Nicolina Angelou, research analyst for IDC's EMEA Quarterly PC Research Group. "Working with Fujitsu Siemens, Toshiba, and Hewlett-Packard on the PC manufacturer side and the three largest telco operators, the program aims to increase Internet penetration by offering subsidized notebooks bundled with broadband connection to students and teachers. As the program continues in 2008 and 2009, consumer notebook sales are expected to be boosted by 150,000 units each year, in addition to the ongoing market expansion. Although the program has until now only affected 10th grade students and schoolteachers, it has recently been extended to 11th and 12th grade students. Moreover, the initiative is opening up the market to new buyers, motivating a wider group of consumers to purchase their first laptop or to renew their old one."

Subsidized notebook prices have increased the pressure to remain competitive, leading to a fiercer competitive environment from both vendor and channel perspectives. Suppliers of the program, Fujitsu Siemens and Toshiba, enjoyed robust shipment growth and strong market share gain in the consumer notebook market in 2007. The appeal of the deal has sparked the interest of a number of vendors, both local and international, which will attempt to enter the deal, offering a wider choice of subsidized notebooks in 2008. Competition is expected to further intensify with the retail entry of Dell and Lenovo, which are likely to create marketing momentum around their new consumer line-ups, adding to the increasing "noise" around mobility. Regarding the channel, telco operators are opening up a new route-to-market to reach consumers, stimulating retailers to decrease prices in order to remain competitive not only against telcos, but also against the increasingly popular etailer channel. Although the weight of the etailer channel in Portugal lags compared to more mature economies, such as the U.K. or the Nordics, its share is growing, highlighting the rising consumer confidence in, and general availability of, the Internet.

Similar to consumers, SMBs (businesses with 1-499 employees) are increasingly attracted by mobility as the price/performance ratio continues to improve. The renewal of the installed base, the replacement of desktops by notebooks, and continued adoption of notebooks drove growth in the SMB segment by 46.0% in 2007, while adversely impacting desktop shipments, which declined by 10.6% in the same period. As a result, the notebook to desktop ratio rose to 65% in 2007 up from 53% a year before. The transition to mobility is expected to continue unabated in 2008, with SMBs benefiting from dedicated products, support, and service. Telcos are also launching new bundled services to SMBs, such as the recent "Office Box PME" offering by TMN, a concept that brings together all voice and data communication solutions for SMBs in a single package, either on converged devices or notebooks. A strong vendor push, targeted channel programs, and declining prices will remain among the key drivers of SMB notebook demand over the coming quarters.

The corporate segment, which is comprised of the enterprise (businesses with more than 500 employees) and public (government and education) sectors, experienced softer but positive trends in 2007. The enterprise market saw a healthy recovery of desktop volumes, as the ongoing cycle of corporate hardware refreshes stimulated 14.0% growth in 2007. As the replacement of the installed base continues, 2008 is expected to see sustained strength in enterprise demand levels, boosting unit shipments by 16.1% across both desktops and notebooks combined. The corporate segment will get additional impetus from the public sector over the next two years. In an effort to place the country among the five most advanced European nations in the technological modernization of teaching, the government is launching a new program called the "Technological Plan for Education." Within this framework, the government plans to spend 500 million to modernize Portuguese schools by distributing approximately 250,000 desktops to local schools across the country. The program will have a significant impact on PC sales to the public sector, and will help maintain strong desktop sales in the coming quarters.

IDC's EMEA Quarterly PC Tracker gathers PC market data in 55 countries, by vendor, product category, sub form factor, brand, user segment, channel, processor, and notebook screen size. The research includes historical and forecast trend analysis as well as price band and installed base.



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