It has been a tough first quarter for the computer industry. A succession of disappointing financial results from major vendors has depressed the market and Wall Street share prices. But who really cares? As far as UK resellers are concerned (unless they speculate on the US stock market), it's of no concern at all. In fact, some of them might well be enjoying the travails of poor old Intel, Compaq, IBM, Oracle and others.
Intel's tragic news is that the chip giant has seen its profit fall below the previous quarter's figure for the first time in a decade - it expects to make less profit than it did last year for the first time since 1989.
Predicted profits will be down from $6.5 billion to a mere $5.9 billion.
Poor old Intel!
Compaq, meanwhile, has had to get by on Q1 sales of just $7.25 billion - about the same as last year. And, heaven forbid, the manufacturer expects a 25 per cent decline in profits this year. So it will only make a paltry $1.4 billion in 1998. Now, do you feel sorry for it?
There are currently a whole range of theoretical models that try to explain recent troubles - the decline in the market, the Asian crisis, delays in moving to NT, falling PC retail prices, market consolidation, and competition (for Intel) from AMD and Cyrix - and thus predict the future. But while some of these factors are affecting the market, I believe the leading force in the market downturn for major earners is reseller power. The balance is slowly shifting.
Enough resellers have now come through the box shifter stage and have started to regard PC supply as a fulfilment task - something you have to do, but don't consider as part of the core business.
Although they might not be making the sort of profits that the major vendors continue to make, resellers aren't, by and large, struggling for business right now. There are a lot of year 2000, service and long-term projects getting underway.
Wall Street has finally pushed the boat out too far. It simply cannot keep demanding that IT vendors continue producing record figures quarter after quarter after quarter. There has to be a limit to the revenue growth somewhere, and it looks as though we've reached it. Unit sales may rise steadily, but prices will have to fall further in order to get the growth, and even lower cost models will have to be used by the vendors.
According to a US firm of analysts, the share of the top five vendors of the US PC market has grown from 34 per cent in 1996 to 46 per cent in 1998. I think that's probably conservative, but it will certainly get worse next year - in Europe as well as worldwide. This is why we have AST moving off the desktop, and why IBM has - according to US reports - 40 weeks' worth of server inventories in the channel. It's also the reason that more consolidation will follow. This time, however, it will be in the vendor space, not in the reseller business.
Simon Meredith is a freelance IT journalist.
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