PC street prices may not rise, says Lenovo

Costs may have gone up five per cent but end-user prices have remained the same in the UK due to inventory issues, Lenovo's midmarket boss tells CRN

Inventory pressures in the channel could mean UK street prices of PCs don't rise at all this year, contrary to expectations, according to Lenovo.

Talking to CRN, Leigh Saunders, head of midmarket for UK & Ireland at Lenovo, claimed the channel has been forced to absorb the impact of unfavourable currency effects this year due to an inventory pile up in Q1 and Q2.

This is despite Gartner warning in April that vendors will have to raise their prices to mitigate the effects of foreign currencies devaluing against the dollar.

"I saw some stats the other day talking about a five to six per cent price increase," Saunders said.

"There's probably been a five to six per cent cost increase, but the reality is that probably hasn't hit the street. The end to end channel is absorbing it because of the pressure in the pipeline."

That pressure was caused by vendors becoming overstocked after being caught out by the downturn in PC sales this year, Saunders said.

Saunders said this impacted all manufacturers and claimed Lenovo cleaned its excess inventory "fairly quickly" and will exit the current quarter "in a good place".

"If you're in an overstocked position, clearly prices aren't going to rise as quickly as costs do," he said. "The channel is starting to get out of those problems. We may or may not see price increases because the FX is starting to come back down again. We could be in a strange situation where it went like this [indicates a spike in prices] but the street has not felt the impact."

Asked exactly how severe the inventory pile up was at its zenith, Saunders said it had been "blown out of proportion".

"The reality is, in order to stay competitive, you have to run sea freight, particularly on volume products, which means you are making decisions three to four months beforehand. All the manufacturers are. So when the market takes a downturn you pile up an inventory. That said, it was a case of reacting quickly to clean it - we are talking within weeks, not quarters - so it's not quite the catastrophe people would have you believe and it's a cycle that happens every five to six years."

Saunders admitted the market is tougher than last year.

"The XP boost from last year went away, but we've also had a General Election in the UK and uncertainty in the Eurozone," he explained.

"All these things have had an effect in delaying refresh cycles but we expect things to get better in the second half of the year. The outlook for this year is it's going to be tougher than last year, but we're pretty confident we're in a good place."