Latin America PC Industry, 3Q02 (Executive Summary) Executive Summary

Transcription

1 Latin America PC Industry, 3Q02 (Executive Summary) Executive Summary Publication Date: December 19, 2002

2 Author Luis Anavitarte This document has been published to the following Cluster codes: HARD-WW-EX-0331 ITSV-WW-EX-0262 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice

3 Latin America PC Industry, 3Q02 (Executive Summary) Latin America Market Overview The region consumed 1,732,624 PCs, generating factory revenue of US$1,712,170,306. PC shipments fell 5.4 percent over a year ago and revenue declined 2.3 percent. Sequentially, the region's PC shipments grew 12 percent, fundamentally because of Hewlett-Packard's better quarterly results. When compared with the third quarter of 2001, shipments of deskbased systems declined 4.5 percent while notebook PCs grew 1.5 percent. Sequentially, the region's deskbased business grew 12 percent while notebooks grew 15.3 percent. Argentina continues to affect the overall regional PC performance, despite its small sequential growth. Considering the total PC market collapse in Argentina's formerly third-ranking PC market, the region's overall performance in both units and revenue was satisfactory. Brazil is showing declines in all computing platform products again as the result of months of a currency mini-devaluation process, the electoral expectations and the psychological spillover of the Argentinean crisis. In an economy so dependent on world trade and financing, adverse world economic conditions continue to affect this nation. Mexico performed well for vendors such as IBM, Dell, Sony, Lanix and HP. On a year-over-year basis, the country's PC shipments grew 4.5 percent and sequentially it had an impressive 33 percent growth because of robust sequential performances by IBM, HP, Toshiba and Lanix. Top Vendor Performance Hewlett-Packard HP slowed its year-over-year decline in shipments from 50.5 percent in the second quarter of 2002 to 28.7 percent in the third quarter of This indicates that market uncertainties over the merger with Compaq in the second quarter of 2002 are simply vanishing. HP now has a clear product and service road map, so IT managers have the confidence to resume their HP acquisitions. IBM Again, IBM positioned itself as the No. 2 vendor in the region with growth in units and revenue. A more refined vertical market approach and integrated offerings in the professional segment are some of the reasons for IBM's solid performance in the quarter. IBM had strong year-over-year performances in Mexico, Colombia, Venezuela and Peru where it grew 167 percent, 59 percent, 44 percent and 42 percent, respectively. Its most robust sequential performances took place in these same countries. IBM moved from a 6 percent market share in the second quarter of 2002 to 6.3 percent in the third quarter Gartner, Inc. 1

4 2 Latin America PC Industry, 3Q02 (Executive Summary) Brazil Dell With 22.8 percent unit growth, the Austin, Texas-based firm is solidly positioned as the No. 3 PC vendor in the region. On a year-over-year basis, its estimated revenue grew only 3 percent, indicating a different product mix and possibly a more aggressive focus on market share over revenue. On a sequential basis, its revenue grew 19.3 percent but declined 10 percent in relation to the first quarter of 2002 when Dell had strong government sales in Mexico. With HP's growth rate decline slowing from the first half of 2002 and IBM's strong performance, Dell experienced slower growth than in previous quarters. In the first and second quarter of 2002, Dell's shipments had grown 63 percent and 31 percent, respectively. There has been some definite improvement from the previous quarter but a decline from the third quarter of 2001, before Argentina collapsed. It has been almost three years since Y2K, when new acquisitions and upgrades took place. Since then, we have not seen consistent all "across the regional board" PC acquisitions in the business segment. Fundamentally, the region is due for a PC replacement cycle in the business segment in addition to government purchases throughout the region. Market Overview Brazil had a weak PC quarter. Furthermore, its market performance is one of theworstwehaveseeninrecenttimes.thefundamentalsbehindthisadverse behavior are twofold: the declining value of the real, its national currency, and the "outcome expectations" from the presidential election that was finalized with the election of Luiz Inacio Da Silva (popularly just known as "Lula"), considered a left-wing politician. Brazil by no means is in the stage of a saturated PC market. Despite Brazil's 7.6 percent year-over-year decline in notebook shipments, Toshiba, Acer, IBM and Itautec experienced gains. The market decline is best explained by Dell's 53 percent notebook shipment decline in the period. Additionalcharacteristicsofthemarket,wereasfollows: Advanced Micro Devices' processor sales grew percent over the third quarter of 2002 with sales in systems manufactured by Metron, Itautec, HP, Microtec and, fundamentally, white-box manufacturers that accounted for 92.9 percent of its sales in Brazil. White-box manufacturers also suffered from a weak market with only 9.6 percent growth over the third quarter of All other vendors, local and international, declined 28.9 percent in the period. Top international vendors Hewlett-Packard, IBM and Dell saw shipments fall an average 38 percent over a year ago. Top locals Metron and Itautec shipments declined a combined 17.3 percent.

5 Latin America PC Industry, 3Q02 (Executive Summary) 3 Mexico Top Vendor Performance Metron With a 6.2 percent market share, this local vendor's shipments declined 20.4 percent on a year-over-year basis. The higher value of the U.S. dollar has forced Metron to raise prices to beyond that affordable by its traditional customers. Indeed, a flat overall performance of home PC demand has significantly affected Metron, but in a higher proportion than other vendors, which implies that Metron may be losing some ground to white-box manufacturers. Hewlett-Packard The Palo Alto, California-based firm saw shipments fall 42.3 percent over a year ago. Historically, especially in the period from 1997 through 2001, HP was the eighth vendor in Brazil. Overall, HP has not had a solid presence in the market. We could say that HP has been "niche oriented" and has been delivering more services than hardware in this nation. Now, with the Compaq numbers, HP is the No. 2 vendor in Brazil with a brighter outlook in the professional segment, both in hardware and in services. Indeed, HP should profit from the strong market penetration that Compaq had in the past in Brazil despite a declining trend in recent quarters before the merger. Itautec Another victim of the market, local vendor Itautec enjoys the advantage of being a technological innovator, having a diversified business and being a member of the Itau bank. It has solid contacts in the business and government sectors in Brazil. Itautec's performance is, in our opinion, a clear indication of the difficulties the business segment is going through in Brazil. It is interesting to note that in the business segment, the only subsegment that grew for Itautec was that of companies with more than 1,000 employees. From a small number, this niche grew 59.6 percent of Itautec's shipments over the third quarter of The pre-election environment in Latin America always affects businesses more than consumers. There are two key elements needed for this industry to resume growth in Brazil: currency stability and an understanding of the new government's economic and political direction. Foreign and local investors are interested in learning how a Lula government will in reality be for Brazil. The first quarter of 2003 will give us a good indication of these variables that are importantly but indirectly related to the PC industry. Market Overview Mexico consumed 443,412 PCs, generating factory revenue of US$488,148,198. Unit shipments grew 4.5 percent and revenue grew 18.4 percent over a year ago. When compared with the third quarter of 2001, deskbased system shipments grew 2.4 percent while notebook PCs grew 22.6 percent. Sequentially, Mexico's deskbased shipments grew 34.7 percent while notebooks grew 20.5 percent. Mexicocontinuesto"savetheregion'sPCface"despiteinternalconcernsabout its PC industry and its IT industry in general. But "numbers talk" and Mexico is growing in some IT areas.

6 4 Latin America PC Industry, 3Q02 (Executive Summary) Andean Region and Chile Mexico performed fantastically well for vendors such as IBM, Dell, Sony, Lanix and HP. On a year-over-year basis, shipments grew 4.5 percent and sequentially it had impressive 33 percent growth, fundamentally because of robust sequential performances by IBM, HP, Toshiba and Lanix. Top Vendor Performance Hewlett-Packard Despiteits18.3percentunitshipmentdeclineintheMexicanmarketinthe thirdquarterof2002,hphadastrongcomebackfromthesecondquarterof 2002, growing 63 percent. This is not surprising after the finalization of the merger with Compaq and given the solid performances that Compaq and HP had in this market historically. Alaska Despite its 14.8 percent decline in the third quarter, this local vendor continues to be well-positioned in the low end of the consumer market. With an attractive reseller program, Alaska continues to successfully occupy the market niches that white-box manufacturers have in other nations. Mexico has seen growth in local nonbranded system builders in the last few quarters, which explains why Alaska is not gaining more terrain in the market. There are also market conditions that do not allow Alaska or other vendors to expand further without affecting each other's share. IBM Ranked as the No. 3 vendor in Mexico, IBM experienced phenomenal unit shipment growth of 167 percent over the third quarter of 2001 and 92 percent revenuegrowthinthissameperiod.thisgrowthhasbeenmostlyinthe desktop business, where unit shipment growth was percent. Its ThinkPad shipments grew by 46.3 percent, but to just 6,000 units, accounting for 11 percent of the notebook market. IBM found fierce competition from other vendors such as Toshiba, HP and Dell with notebook market shares of 28.7 percent, 19.3 percent and 13.4 percent, respectively. Sony, which is mainly in the consumer business, therefore not competing with IBM, took a 14.4 percent share of the Mexican notebook market. Mexico continues to offer good gains for top-tier vendors. It is clear that in 2003 we will see phenomenal competition between the top international vendors HP, IBM and Dell in the professional segment. In this segment, HP and IBM have a more substantial penetration capacity given their service businesses. Nevertheless, Mexico is a market closely following "who is who" in the U.S. market. This is definitively a plus for Dell, if its price structure remains competitive, given Dell's No. 1 position in the highly competitive U.S. market. Market and Vendor Overview Despite positive GDP indicators, none of the four economies are experiencing healthy overall economic conditions. Indeed, there is a phenomenal inequality of income distribution, which is keeping these economies in a recession. A good example is Peru, which is targeted at closing the year with GDP growth of 3.6 percent, despite one of its worst recessions in recent history.

7 Latin America PC Industry, 3Q02 (Executive Summary) 5 Argentina This subregion continues its flat performance. It grew 1.6 percent in unit terms, with clear growth in Colombia. The revenue results were more encouraging: The subregion generated $248 million, posting year-over-year growth of 4.5 percent. The big winners in the subregion were Toshiba with 45 percent year-over-year unit shipment growth, Olidata with 33.6 percent and, IBM with 29.1 percent. The home and education markets grew 6.6 percent and 10.1 percent, respectively, in the subregion. ThebusinessenvironmentcontinuesunderseverepressurewithlowerPC acquisitions. This market segment declined 2.2 percent in overall unit shipments, with the following breakdown: Businesses with fewer than 19 employees declined 1.1 percent; businesses with fewer than 99 employees but no less than 20 employees declined 1.9 percent; businesses with less than 499 employees but no less than 100 employees declined 1.9 percent; businesses with less than 999 employees but no less than 500 employees declined 7.2 percent and businesses with more than 1,000 employees, declined 0.6 percent. Notebook shipments grew 6.4 percent while deskbased systems grew only 1.1 percent. Lower import duties with consequent better prices, and better communication infrastructure, boosted notebook penetration in this subregion. Microprocessor manufacturer Advanced Micro Devices posted substantial gains in the subregion with 32.9 percent growth, signaling that its market strategy in these countries is on the right track. Intel Pentium 4 sales more than doubled those of Celeron; clearly Pentium is stealing market share from the later rather than the market expanding for Intel. According to forecast GDPs, the subregion is growing economically. The big question is how soon and how much that growth will impact IT and the PC industry in particular. The subregion needs to renew purchases in its PC professional segment cycle. Some verticals, such as banking, will show less PC adoption aggressiveness because of consolidations but other verticals, such as mining, should renew purchases because of strong gains in On the other hand, government and official statements indicate that the PC industry should be growing in this subregion at accelerated rates. Vendors should persuade governments in the adoption of technology by presenting them with initiatives and interesting packages. It is now time for technology to occupy a solid position in the governments of these countries. Market Overview Whilesequentially,thePCindustryisslowlyimprovingitsperformancein Argentina, the PC market is still far from stabilizing and resuming healthy growth. While some progress has been made on the political and economic fronts, most likely things will not be politically stable until the new president is elected during the first quarter of Investors need midterm to long-term rules to allocate financial resources, which, unfortunately, they are not going to get from an administration exiting power in less than four months.

8 6 Latin America PC Industry, 3Q02 (Executive Summary) On a year-over-year basis, unit shipments plunged 82.5 percent. Sequentially, shipments grew 23.5 percent. Based on revenue, the market dropped 81.6 percent over a year ago. Sequentially, it grew 28.3 percent. All market segments and subsegments declined more than 80 percent when compared with the third quarter of On a sequential basis, they grew as follows: home shipments grew 17.3 percent; businesses with fewer than 19 employees grew 21.3 percent; businesses with fewer than 99 employees but no fewer than 20 employees grew 27.7 percent; businesses with fewer than 499 employees but no fewer than 100 employees grew 29.6 percent; businesses with fewer than 999 employees but no fewer than 500 employees, grew 29.9 percent; and, businesses with more than 1,000 employees, grew 35.3 percent. Sixty-one percent of the market systems were priced at below US$1,000 indicating, obviously, the price sensitivity of the market, but more importantly, that the "low-end wheels" of the market are moving despite severe adverse economic conditions in an environment dominated by a large secondary PC market generated by the economic crisis. Top Vendor Performance Sequentially, HP is showing larger market penetration improvement than its closest competitors. Dell is also moving ahead in a market in which it had, historically, a small presence. White boxes have shown progressive growth since the first quarter of 2002, when the market collapsed. Both desktop and notebook PCs are showing equal sequential growth. The only clear scenario for the PC industry in Argentina is that the market will not see its historical pre-2002 growth rates for quite some time. We will see small sequential growth if the main economic variables remain stable or improve.theexchangerateiskeyintheshortterm,untilthenationisableto fix its finances with its top international lenders. This will not happen until the new government is functioning and with a clear economic plan. Puerto Rico and Rest of Latin America Market and Vendor Overview The Puerto Rican market has had a solid third quarter. The market continues to be fundamentally a "four vendor" market. Hewlett-Packard, Dell, IBM and the category "others" are the core of PC suppliers in this market. HP continued as the market leader, and given Compaq's presence before the merger with HP and the reinforced operations that HP implemented a few quarters ago, HP should expand its market share. Dell has dramatically improved its presence in Puerto Rico. Its strong positioning in the United States and the fact that Puerto Rico houses many U.S. subsidiaries is definitely helping the Austin, Texas-based company. IBM's presence in Puerto Rico is quite extensive, but more in services than in PCs.

9 Latin America PC Industry, 3Q02 (Executive Summary) 7 From a market segment perspective, Puerto Rico offers a limited consumer niche with most of its opportunities in the professional segment. The Rest of Latin America region has the lowest per capita PC penetration in Latin America, providing large opportunities for vendors. White-box manufacturers dominate this geographical area, and vendors must keep their opportunities open in the professional segment. HP, Dell, Toshiba and IBM are the top four vendors in the Rest of Latin America. Puerto Rico and the Rest of Latin America combined represented 12.9 percent of the total Latin America PC market in the third quarter of It offers an interesting "piece of the Latin America PC pie" and, what is most important, a large potential. This region is underpenetrated by the PC industry given its cost difficulties in deploying sales in various small markets. Despite economic difficulties in these smaller economies, the Rest of Latin America region has historically offered solid gains to the PC industry. Formorequantitativedetailsonthethird-quarterperformanceoftheLatin American PC markets, please see the following Market Statistics documents: "Latin America PC Quarterly Statistics, 3Q02" (HWCP-LA-MS-0167) "Andean Region and Chile PC Quarterly Statistics, 3Q02" (HWCP-LA-MS- 0177) "Argentina PC Quarterly Statistics, 3Q02" (HWCP-LA-MS-0179) "Brazil PC Quarterly Statistics, 3Q02" (HWCP-LA-MS-0175) "Mexico PC Quarterly Statistics, 3Q02" (HWCP-LA-MS-0172) "Puerto Rico and Rest of Latin America PC Quarterly Statistics, 3Q02" (HWCP-LA-MS-0180)