Industry predicts solid financial year

Industry predicts solid financial year

The 2004/05 financial year could be one of the best so far according to some industry representatives. But for several distributors and resellers the news isn't so good - ever-decreasing PC hardware margins have taken the spark from their balance sheets.

Westan managing director, Victor Aghtan, said the company recorded strong sales in May, and maintained June would be a good month. However, the figures were not as high as he expected.

"We are seeing that the first half of the financial year was better than the second half - normally it's the reverse," he said. "This year won't be as hot as last year. It will be good, but not hot."

Aghtan blamed the continued loss of systems sales business by local vendors to multinational players. Citing IDC figures, he claimed the channel had lost about 15 points in the past three years.

Plus Corporation managing director, Nigel Fernandes, said the reseller had focused on high-end gaming machines and servers to maintain its profit line.

These segments had seen turnover this year already exceed that recorded in the 2003/2004 financial period, he said.

"We haven't shipped more units, but the value has increased so that each is worth more," he said. "We don't see the mums and dads that used to buy the $1500 desktop machine anymore. Dell has cleaned up in this area. I'm surprised at how low it can sell PCs for; its bottom line machine is $900. We don't want to touch that - there's no margin."

It was getting even tougher for broad-based channel players, Multimedia Technology general manager, John Hassall, said. Despite expectations of a record year, Hassall said the distributor's smaller resellers were finding it harder to cope.

"We are starting to see pockets of softness," he said. "A lot of traditional customers are struggling and getting squeezed. We have lost several in the past six months who are changing direction or going broke."

To keep its head above water, Hassall said the distributor was aiming to differentiate its business through a more services-oriented focus. This not only included pre- and post-sales services, but also a focus on several niche areas.

"Rather than be a jack of all trades, we're putting our energy into niche markets," he said. "So we're doing more work with home theatre, digital signage for business, wireless networking and VoIP. These take a little bit of extra expertise - it's not like selling an HP printer."

Figures show consistency

Last year, several distributors reported record figures for June but this year's growth has been more gradual. NetOptions managing director, Richard McAlary, said the value-added reseller had experienced similarly modest growth so far.

"Overall, it's steady as we go this year with the exception of SMB - this seems to be where the growth is," he said. "The 04/05 year is more consistent, whereas 03/04 had more bumpiness. We're not seeing that June will set any records."

Other integrators also identified the small and medium business market as the most robust area of growth. Technologies such as servers, storage, VoIP and security were key drivers in those markets. Niche security distributor, Whitegold Solutions, said the popularity of its technology sector was reflected in its sales growth.

Sales director, Jonathan Odria, said the company was expecting to record five times the amount of growth this year compared to last June. This was accomplished through an increase in its vendor line-up, he said.

"Virus attacks and spyware are big concerns so our Barracuda products are doing well," Odria said. "People are also looking for a product to do everything, so we've seen a big increase in our Fortinet and WatchGuard products."

Computer Associates had found its heavy focus on the spyware market had paid off across all markets, channels and alliances director, Vicki Bain, said.

"Security last year was strong, but now it is booming," she said.

The vendor recorded buoyant sales in May and was still on track for June, Bain said. This was also boosted by increased interest from the professional services market in data management software.

Industry representatives suggested the market was exhibiting a more positive approach to IT purchasing.

Data#3 managing director, John Grant, said this was reflected in the balance between the need for investing in IT versus presenting information more effectively. There were two sets of requirements on businesses at work: the corporate regulatory environment and a renewed focus on business enablement.

Like Grant, Bain said customers were now looking to encapsulate their knowledge of and information on their existing data. This was occurring across both the enterprise and mid-markets.

Positive reaction

"People can't spend more dollars if they don't know what they have," Bain said.

Grant said the market as a whole was reacting more positively in its approach to purchasing.

"Customers are still watching their dollars, but there is an improving sentiment towards the value of IT," he said.

Amicroe Australia general manager, Scott Clark, claimed May was the distributor's second largest month on record.

The last three months had been its biggest three months in history, he said, with sales up 55 per cent compared to the same period last year. "The market is strong, and retail is performing as well. This is looking like our best year in total sales," he said.

"It's not like years gone by where May and June went crazy. This time the growth is more solid. We used to get a bigger spike in June, but now there's solid optimism in the market."

Although on a concerted sales push, Acer marketing director, Raymond Vardenega, said the vendor would record its biggest May and June to date.

It had also experienced stronger uptake earlier in the year across the board, he said.

"The June bonanza last year happened later," he said. "But now business profits are up. People are looking past survival and into long-term protection."

CA's Bain said many of its customers, including government, were also ordering products earlier in the financial year.

"Business is more predictable and end users are becoming more consistent," she said.

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