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1999 retrospective

1999 retrospective

Reports of the PC's death are still greatly exaggeratedDespite miniscule margins and the call for the PC's demise, the PC industry as a whole has done remarkably wellA Shakespearean drama, with all its twists and turns, holds nothing on the Australian PC industry over the last year.

The only thing that has consistently held true is that you can trust no one. Products will be late. Systems will not do what they are meant to. Vendors will go direct when they have gone red in the face telling you they will not.

And even faith in some of the old truisms such as the dominance of Wintel were belied with the astronomical resurgence of that crazy coloured fruit company Apple, which experienced such a high demand for its iBook and G4 computers that chip supplier Motorola couldn't keep up (September 29).

And the greatest lie of all might be the latest catch- cry, though it certainly isn't new - the death of the PC (November 24).

According to such industry stalwarts as Lou Gerstner and Scott McNealy, we are now privileged enough to be living in a post-PC era characterised by dedicated devices, rather than the cumbersome beige desktops we are all so fond of.

In fact, the new generation of handheld devices was the only thing to resist the economic calamity Asia recently underwent (June 23) and Comdex proved to be the launching pad for several Internet-only devices from such companies as Microsoft and Hewlett-Packard (Nov 24).

The abysmal performance of IBM's PC group and the merger of the vendor's business consumer and PC units reflects the struggle even the top tier-vendors are going through in trying to make margins on the traditional PC (October 21).

The ramifications for the PC channel are amplified even further, with margins subject to vendors using the PC to bring in more lucrative service and support contracts, changing the role of the traditional channel. This is especially apparent in the US, where Hewlett-Packard's entire range of PCs was taken off retail shelves and sold exclusively through HP's online store. HP also launched its online store in Australia, though it was quick to reassure resellers of its continued commitment to the channel (July 14).

On a more local front, Acer's propensity for direct deals, despite substantial investment in the reorganisation of its channel (February 24), continued to exacerbate its resellers. Several direct deals with Telstra (January 27, November 10) came hot on the heels of a massive contract with the Department of Education.

And of course the most talked about vendor in terms of channel strategy, Compaq, managed to hit the headlines on a regular basis due to its constantly evolving channel policy. Firstly, it was the rationalisation of its distributors to six (March 17), followed by the restructuring of its direct reseller program (March 31), the ousting of CEO Eckhard Pfeiffer after shocking quarterly results (April 28), and then the ongoing retail store and Internet saga, beginning in August.

Despite these controversial moves, Compaq managed to maintain its position atop the local PC pile, edging out Dell, which overtook it worldwide (November 3).

The commodification of the PC is not just exemplified in the direct selling strategies of multinational vendors. The "free PC" phenomenon did its fair share of damage to an already struggling market and its representatives in the reseller and retail community.

The "chameleon PC", as IDC dubbed the cheap Internet and PC bundle, reared its ugly head in February when FreePC.com launched the offer in the US. However, consequent offerings in Australia by Eisa, Edge and Compucon in June, among others, failed to capture the public's imagination, with retailers such as Coles Myer and Harvey Norman branding the exercise a failure.

However, a more recent deal between IBM and Primus to supply the 2.1 million member-strong ACTU with a bundled Internet and PC deal for $8 a week may see a revival of the strategy (December 1).

And the ramifications of free PC deals are still being felt. PC prices had been tumbling all year, with the latest sales gimmick being the sub-$1000 PC, yet Internet PC bundles also put pressure on peripheral margins. People were asking: if I'm paying nothing for a PC, why am I paying so much for a printer or scanner? The PC reseller's lifeblood was slowly being drained (May 26).

Yet vendors are also suffering, with the recent folding of Packard Bell NEC in the US just one of the fatalities for traditional PC companies (November 10). National Semiconductors also quit the chip making game in May after taking a financial beating in previous quarters. Yet IBM managed to rebrand itself as an e-business company. Rival Hewlett-Packard is attempting to walk the same route, last month announcing a new branding campaign set to cost the company $US200 million worldwide.

And amidst all these manoeuvres, as companies sought to accelerate beyond being desktop movers or manufacturers and move into the e-business sphere, there has been an amazing amount of technology generated.

Take for instance the ongoing battle between Intel and AMD. Both started the year with processor speeds of 400MHz. The latest offering is a 750MHz chip with plans to hit the 1000MHz mark scheduled for early next year.

Both have also moved from 0.25 micron techno-logy to the more refined 0.18 micron version and are working on IA-64 bit technology.

Intel launched its Pentium III range of processors and AMD announced its Athlon series, previously branded the K7 (July 7).

Yet the technology the PC industry has witnessed over the last year has been characterised by a number of negative factors, namely component shortages and the inability of vendors to produce on time. Microsoft and its Windows 2000 OS is an obvious example.

But Intel also struggled to produce its mobile Pentium III chip and 0.18 micron chip by deadline and when the PIII eventually did ship a lot of Australian retailers complained of stock shortages (March 17).

Stock shortages have in fact marred what has otherwise been a record year for the PC industry in Australia, shipping more units than ever before (September 15). Memory and TFT screen scarcity were especially acute, with the earthquake in Taiwan amplifying worldwide supply and demand problems (October 6). Consequently, the price of memory, which had consistently been falling, all of a sudden climbed to dizzying heights.


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