Notebook Momentum and Multi-Equipment Will Continue to Drive Growth in the Italian PC Market in 2008
Following a moderate Christmas season, the Italian PC market returned to double-digit growth in 1Q08, with shipments rising by 13.5% year on year. Notebook momentum continued unabated - particularly in the consumer space, where sales grew by 35.6% compared to 1Q07. Unlike the rest of the region, the desktop market posted 2.5% growth, boosted by outstanding performance in the corporate segment, reflecting healthy enterprise renewal activity.
Amid rising concerns over international financial fluctuations and climbing oil prices, IDC expects the second quarter and second half of the year in particular, to remain driven by the continued transition to mobility, multi-equipment purchases in the homes, and declining price points across all segments, which should lead to an 11.7% increase in overall PC shipments in 2008.
Sustained notebook demand remained the key engine of market dynamics, particularly in the consumer space, recording 35.8% year-on-year growth. Benefiting from fierce competition between A-brands in the retail market as well as increasingly attractive products and new designs at affordable prices, consumers continued to renew their laptop and/or buy additional systems for the homes. Transition to mobility continued unabated, with the share of notebooks rising to 69% of total PCs, up from 58% a quarter ago, boosted by accelerating multi-equipment purchases, as increasing segmentation by usage scenarios is fuelling demand for a wider range of products, from ultraportable to transportable models.
Additional momentum was created by the launch of Asus's Eee PC. For the first time, ultraportable notebooks have become affordable to a wider customer base. And, in addition to the price, product design, ease of use, and the Internet-centric value proposition seemed to resonate with consumers. An increasing number of low-cost models will hit the market in the second half of the year, which, coupled with telco offers, will create additional buoyancy in the consumer notebook space this year, boosting portable penetration in low-income segments and other new-buyer categories, such as the senior population.
Several low-cost ultraportables were announced in 2Q08 by international as well as local vendors and are expected to contribute to a very successful back-to-school and Christmas season, boosting consumer notebook growth to 31% in 2008.
HP, Dell, and Acer already announced their own low-cost ultraportables, while Olidata, the biggest national vendor, launched the JumPC last month, which is the first Italian-made "Netbook", uses Intel's Classmate PC, and mainly targets children from 6 to 10 years old. The main differentiator is the "Magic Desktop" software, which features an interface that is aimed at children for easy and secure computing, and includes parental control functionality and USB keys with educational computer games. Olidata's JumPC will be available in big retail stores such as Auchan or Euronics. Customers will also be able to buy it bundled with a broadband connection from Telecom Italia or Tiscali.
PC vendors are aiming to embrace the masses with low-cost notebooks - like mobile phones did - covering a large breadth of the population, from grandparents, who will use it to communicate online with the youngest generation, to inexperienced buyers and children, as well as fashionable teenagers.
"Consumer notebook demand will remain the key engine of growth, fueled by faster renewal trends and further expansion of the installed base through multi-equipment homes", said Nicolina Angelou, research analyst for IDC's EMEA Quarterly PC Research Group. "Low-cost ultraportables are expected to gain increasing traction as secondary devices, especially when bundled with a WiFi connection."
A fiercely competitive environment, noise around low-cost mobility, traction in the telco channel, and Dell's successful entry in the retail channel have all contributed to aggressive price cuts. The arrival of new low-cost notebook models will put further pressure on already-declining prices, and some vendors are likely to push entry-level prices closer to low cost, which will drive further ASP declines.
Like consumers, SMBs (businesses with 1-499 employees) also continued to opt for portability, with the share of notebooks rising up to 58% (versus 52% in 4Q07). In line with the forecast, notebook growth in the SMB segment posted overall moderate growth at 6.3%, affected by the political uncertainty and elections in April. However, commercial notebooks overtook commercial desktops for the first time this quarter, assisted by the ongoing renewal of the installed base and the replacement of desktops by notebooks.
Attractive offerings, dedicated telco promotions of bundled notebooks, and further price declines will continue to stimulate SMB demand for portables throughout the year. Moreover, the new wave of low-cost ultraportables is likely to add incremental volumes, as vendors also target mobile professionals, for example, by adding dedicated security software.
Despite fears of a U.S. economic slowdown and turmoil in the financial sector, the corporate sector, which is comprised of the enterprise (businesses with more than 500 employees) and public (government and education) sectors, recorded strong results in the first quarter, with shipments rising by over 19% year on year. Corporate desktops displayed outstanding growth at 30.3%, highlighting the expansion of enterprise refreshes, and helping to maintain overall desktop volumes. Corporate renewal activity also had a positive impact on notebook sales. However, due to higher security, easier deployment and manageability, and therefore lower cost of ownership, desktops will remain the key computing platform.
Overall, economic uncertainty may lead to more cautious business spending behavior in some sectors in 2Q and 2H08, with some refreshes postponed slightly. However, declining prices and fierce vendor competition should help maintain growth in the corporate space compared with the previous year.
The low-cost ultraportable trend is also likely to hit the education market in the coming quarters, and considerably improve the ratio between students and computers, as every student could have a device that is cheap, light, and small enough to carry all the time. Schools are expected to place orders for low-cost ultraportables from 2009 onwards.
The Italian PC market experienced further market share consolidation between HP and Acer in 1Q08, and they now account for 52.3% of the market, up from 44.6% a year ago. As competition is not likely to soften, Italy will remain among the most price-competitive countries and the fierce competitive environment will continue to make it increasingly challenging for tier 2 vendors and local players.
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