There is an all-out assault on the largest direct sellers. Although Viglen is very UK-oriented, other hardware manufacturers could learn from its direct model, according to Terry Ernest-Jones, analyst at IDC.
His comments came after Alan Sugar, chairman and founder of Amstrad, distanced himself from the vendor after announcing that the holding company would be split into two (PC Dealer, 11 June).
Speculation that Viglen would become a target for those vendors eager to find a way of breaking the top vendors? strangle-hold on the market has continued this week.
Comments from Ernest-Jones reflect the pressure some manufacturers are under. Vendors outside the top five, who can?t see a way to break through with the channel, may well consider going direct, and Viglen has indeed established a good model in the UK.
Along with the likes of Granville Technology (Time) and Tiny Computers, Viglen has managed to carve out a decent market share, especially in the home market, where potential still outstrips the level of uptake.
Even the market leaders have been enticed by the appeal of selling direct. Compaq is the first high-profile vendor to announce it is going direct, but there could be more to come.
Discussing the future prospects for the server market last week, Hugh Jenkins, enterprise group product manager at Compaq, said: ?It is absolutely clear that the provision of services in the market will be done on a best-of-breed model ? where you get your hardware from may not be where you get your service and support.?
This could be interpreted as a message that says dealers should provide service and the vendor should supply the box. But that is not what Compaq believes at all, Jenkins added. Going direct would be a negative move and go against everything that Compaq has worked for in the past.
Even so, Compaq has been responding to direct vendors ? Dell in particular ? that have won share in the business market. Compaq?s aggressive marketing and price-competitive campaign is a major part of the assault to which Ernest-Jones referred. But it seems to be having very little impact on the direct vendors. At best, Compaq can be said to be halting Dell?s advance, but it is almost certainly not pegging the company back. And if Compaq is worried, how will other vendors struggling to make ends meet be feeling at the moment?
Now there is a new danger. Viglen is going to the stock market in August and its flotation will raise cash for a further attack on the market. The consumer market has a great deal of potential, but it seems unlikely that Viglen will ignore the business market in the future.
This of course, is assuming that it does not get bought by anyone else. Who might buy it? Other direct vendors such as Elonex or Time could be in the frame, but PC firms that have struggled to make enough impact on the market in recent years could also be in the picture.
Mitsubishi is in the right place and could probably justify the purchase if it was to stick Viglen to its knitting in the home and small business market, but other vendors might also consider moving in ? particularly Far Eastern firms. Mitac, for example, has struggled to keep its balance on the thin wire of low price and volume that is not quite high enough. Viglen could revitalise its fortunes and make use of its UK manufacturing capabilities.
Other prospects include Acer, Wearnes, and Korean giants Samsung and Hyundai. But all of these firms have had their fingers burned in the branded product market, so the chances are they will stay away. It might makes sense for Olivetti, but like most European manufacturers now, the company is strapped for cash and not ready, even though it would not seriously disrupt its channel strategy at the present time.
Other potential buyers include ICL and Bull. They could easily integrate Viglen into their structure, but it is hard to see how Viglen would fit into their strategy. The same applies to other PC market chasers like Digital, Siemens Nixdorf and Unisys. It would be too much of a disruption and too much of a culture shock.
While most of these firms can be discounted as prospective buyers, the break-up of Amstrad will make them think long and hard about their position in the market. Amstrad was once one of the most successful PC vendors in the UK and, more than any other company, it brought the PC unit price down to a level which enabled the development of the volume corporate market and retail markets in the UK.
Now Amstrad?s name is well and truly gone from the market, and it is leaving behind a strong player in the direct sales arena that knows where it is going and is eager to grow. There is a good chance that Viglen will be fighting for a share of the business market this autumn.
PC vendors that can?t break one or two per cent share of the market will not find their lives getting easier as more direct sellers arrive and as more users become confident in buying this way. Also, with PC market growth slowing and inflation and interest rates edging upwards, a degree of caution over pricing is being introduced to the UK economy. Confidence is high, but so is the understanding that business needs to keep its costs under control.
The problem for the vendors is that if they don?t make the switch sooner or later, then someone else might and the chance will be gone.
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