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Sunday, December 28, 2008

PC sales dip 25% in Dec on weak consumer sentiment

NEW DELHI: It’s cold out there. Not only the weather but the market for personal computers
. According to the hardware lobby,
Manufacturers’ Association for Information Technology (MAIT), industry reports suggest almost a 25% dip in sales this December compared to the same month, last year. The dip in sales is being attributed to a decline in consumer and business sentiment, as people want to hold more cash in uncertain times. On the whole, the third quarter may be one of the worst for the IT hardware in many years.

Says MAIT President Vinnie Mehta: “Initial reports for this month suggest that the sales are down by almost 22-25% from last year. Sales to export oriented units have been hit. Government employees who were expected to spend more cash due to the recent pay commission hike are also seen holding on to their liquid cash.”

Meanwhile, a lot of money is reportedly stuck in distribution channels as IT distributors report large payment defaults. No IT player was willing to comment on the same. But HCL Infosystems vice-president George Paul said that the industry is now banking on public sector sales in the last quarter as departments rush to utilise their unused budgets.
He, however, ruled out a negative impact due to a price hike, twice this year, which was a fallout of the rising dollar.

“A price hike of Rs 1,000 or so, does not affect buying decisions. But due to a financial downturn and liquidity crunch, subsidiaries of MNCs operating in India have put their buying decisions on hold. IT-ITeS and banking sector sales are especially hit,” Mr Paul adds.

Meanwhile, capacity utilisation is also running low in the assembling plants of many PC makers as they report large inventory pile-ups.

The October-December quarter is conventionally seen as the best sales season as festive buying on Diwali and Christmas eve boosts PC sales. But thanks to dented consumer sentiment this year, consumers and CIOs are holding on to their liquid cash, as they are uncertain of the future. For enterprises, the third quarter was never a great period and the economic slowdown has made things even worse. Meanwhile, SMEs are finding it hard to generate funds for expansion due to a liquidity crunch in the banking sector. As per IDC data , in the quarter ending September 2008, desktop PC sales in the country dipped almost 8.9% compared to the same period last year. The desktop PC sales fell by a whopping 1.54 lakh units. On the other hand, there was some shift of consumer preference seen towards notebooks.

The growth in PC sales is set to go into negative in the third quarter but sales in the next quarter are expected to perk up a bit thanks to government buying, according to MAIT.

Leading manufacturers of computer hardware
like Samsung and LG also hint at a cold market. Says Samsung India’s Information Technology Director Ranjit Singh Yadav, “There’s no doubt that the market has been under pressure this year. Buying by small offices and homes has fallen. We have been able to register marginal growth in the business in December 2008 over last December.” Agrees LG Electronics India business group head (Digital display and storage division) R Manikandan: “It’s true that different markets of the country are behaving differently. There’s some drop in sales in Northern India.” All said and done, PC makers will have to brace up for the tough times ahead—if it’s not the economy, powerful smart phones and devices like net-tops will eat into their market share.

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