Asia/Pacific PC market is one to watch

Asia/Pacific PC market is one to watch

The way Dataquest senior industry analyst Scott Miller sees it, Australia, New Zealand and the Asia/Pacific region, including Japan, are the places to watch in the near future.

"They're getting near price parity with the US," he says. "Asia/Pacific, without Japan, will have 16 per cent of the world PC market by the year 2000. Asia/Pacific's PC market in 1996 grew by 24.5 per cent in units, with a sustainable growth of 24.7 per cent."

This compares to 13.6 per cent growth in the North American PC market for 1996, which Dataquest predicts has a sustainable growth of 14.9 per cent, and a world total growth of 19.1 per cent, 17 per cent of which is sustainable.

Miller says Dataquest research indicates that PC makers are being forced into what Miller calls "the velocity business model" by ever-tighter margins. Shrinking margins mean PC makers must maximise their inventory turns and compete on a cash basis.

Direct channels

"Those companies which have caught on in the past few years are Packard Bell, Dell and Gateway. Others such as Apple, Compaq and IBM are moving in the same direction in order to be able to compete. It's easier to do this if a company has a single, direct channel. HP is building to customer and channel order - it did that with the printer model and now it is trying to do it with its PCs. It takes time for this to catch on, but when it does, the company becomes a virtual store.

"Intel is making 15 per cent price cuts possible. However, when something goes wrong, the PC makers are left with no stock and therefore no money to pay bills," he said.

Miller believes Microsoft is also pushing PC prices down by working on a transaction model where the user pays for every bit they use on a PC - such as software and the Internet.

"They drive prices lower by saying 'I don't care what they cost. I make money on each transaction - therefore get lots of PCs out there.' And the best way to do that is to sell them at low prices."

Miller says Microsoft is undergoing something of a rejuvenation, probably due to competition from Netscape. He says one of the signs of this is that Microsoft is spending more on research and development as a percentage of sales than ever before. "The bottom line is they're spending money like you wouldn't believe," he said.

The Apple effect

Dataquest has found that the home market for PCs has been strong with a still-growing x86 market, but home computers in general have been held back by what Miller calls "the Apple effect".

"Apple is going off a cliff," says Miller. "The market is clearly depressed by Apple, which is still the number two consumer choice. The only upside is if Apple adjusts its pricing or if its buyers defect to another brand."

Miller believes Apple's performance in the next quarter is crucial to its future. "I believe if Apple does not become a player this quarter, then it will become irrelevant in the US consumer market."

Taking another view of the market, he says hand-held devices and network computers may be the way of the future for home computing, but not in their current forms. "PC makers have to think of the social context - don't think just because you have a great new device you're going to change the way people behave. People are not going to substitute a computer for a TV.

"Another important thing is the interface. Instead of trying to throw everything that was in a PC into it, maybe create a new class of product."

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