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The agony seems to have piled up on the IT hardware front in India during the slowdown in FY 09. As a cumulative effect, the impact not only remained limited to the hardware principals but also trickled down to the distribution channels as well. Be it national giants like Ingram Micro and Redington,medium level players like SES Technologies and Rashi Peripherals, or regional players like Sogo Computers and Technocrat Infotech, every IT hardware distribution company endured heavy losses in some business division or the other which constricted their annual growth.

The jolt came as an additional blow to the distribution fraternity as they were already fighting with threats like decreasing margins, multiple competitors in same product-lines and increased pressure from vendors to do volume business. The year, therefore, raised questions of survival to many of the distribution houses as they ruffled their way through to beat the economic meltdown.

Hardware Blues
IT consumption in FY 09 was severely impacted, especially in the second half. As per MAIT findings, for the first time in India, PC sales recorded a negative growth of 7%. What was more disturbing was the fact that key growth drivers for the Indian hardware industry like notebooks, servers, display products, and printers suffered adverse growth last year that in turn affected all stakeholders. The impact was more visible on notebook consumption as sales dipped. Unlike a steady growth shown in preceding fiscals, FY 09 witnessed a negative turn and growth slipped down by 17% for the first time in many years. Sale of desktops also went down by 4%. However, server and storage growth although affected, remained more or less flat.

CyberMedia Research    DQ Estimates

It was a year of survival of the fittest, and those who managed to enter the top 10 list have proved their ability to steer their business in the right direction, withstanding difficult times to be the true match winners

Notwithstanding a satisfying first half, impact on hardware sales became more pronounced during the second half of FY 09. The OND quarter in particular was hard hit, and the situation went beyond repair with sales in almost all product categories receiving major blows. With PC sales tumbling down drastically, distributors felt the heat as PCs constitutes one of the key component in their business. The impact was borne by both branded as well as assembled segments and there was no respite for distributors. Monitors and printersthe other two major bread earners for distribution businessalso met with similar fate as both product categories witnessed decline in their sales. Even component business, led by processors and hard disks, faced severe crisis as PC sales were badly affected. The only saving grace was server and storage product-linesthe second key component of the distribution business. With data center growth on the rise, demand for server and storage solutions somewhat remained intact, generating good business for the distribution channel.

In the desktop and laptop space, HP continued to be the dominant player followed by Acer and HCL. Dell, however, emerged as the surprise winner as it successfully convinced consumers about its vibrant product-lines. Having initiated its channel business in the beginning of FY 09, Dell rolled out some good channel policies and attractive incentive schemes for its partners which made the company walk away with many national and regional distribution powerhouses. While most of the leading PC brands suffered during Q3 of the last fiscal, Dell continued to do good business. By Q4, once the market started to show some signs of revival, Dell managed to conquer a handsome market share beating the likes of HP and Acer. One major flop in FY 09 has been Lenovo since its popularity with both consumers and partners plummeted. The brand failed to pull sales both in desktop as well as laptop categories. While its competitors failed to fill up the lacuna created by Lenovo, Dell not only made most out of the opportunity but reinstated its market position by eating up a large chunk of the share left vacant by HP, Acer, and other PC brands. This sudden shift in trend naturally got reflected among the distribution fraternity. While players dealing with Lenovo products along with HP and others definitely felt the brunt, those selling Dell products appeared to be stronger to tackle the slowdown.

While CRT took a backstage last year with most of the leading display vendors discontinuing the product-line, TFT or LCD monitors became the hottest selling product in the display category. And with the cost of LCDs declining further through the year, demand for the product soared even higher. However, the transition forced distributors to increase their volume sales for LCDs in order to make good margins which was again not a very difficult task for them. One big upset in the monitor segment in FY 09 was Samsung whose sales decreased drastically. The vacuum though was filled up by AOC and Acer. Both these brands churned out good business for their partners. AOC, in particular, witnessed increased adoption among distributors through its aggressive and channel friendly policies.

For printers, adoption of laser technology among users increased rapidly, while inkjets remained steady. MFD devices have been the flavor of the season with new technology launches by principals at regular intervals and also reduction in prices. Although HP continued to dominate printer and consumable segments last year, brands like Canon, Samsung, and Epson did good business as well. However, both monitors and printers couldnt grow much as both categories had to bear the brunt of the slowdown.

Two more areas that witnessed explosive growth in the previous two fiscals were external storage devices and laptop accessories. Although they were less affected, growth was limited for both. Consumption of flash drives and SD and MMC memory cards/sticks were moderate and that of external hard drives, digital cameras and MP3/MP4 players were restrained. Demand for gaming products like, high end graphic cards, joysticks and other related devices and accessories failed to attract significant buyers.

CyberMedia Research    DQ Estimates

The four Meccas of Indian IT hardware businessNehru Place (New Delhi), Lamington Road (Mumbai), GC Avenue (Kolkata), and Ritchie Street (Chennai)too witnessed business downturn. H2 in particular, put the local distributors and resellers through an acid test as the already stiff competition among them became more pronounced

In the component business, the impact was inevitable on Intel and Seagate even though they were leading in their respective segments. Brands like AMD, Western Digital, and Hitachi however generated some good business through aggressive marketing activities. Amidst all these turnarounds, business was mild for those distributors who tried to focus on their own brands as the market for components and accessories remained down last year. Instead of actively promoting its brandV7Ingram remained de-focused with it and limited itself from launching any major new products. Supertron, on the other hand launched Solitaireits premium brandin addition to Supercomp to address the niche market segment. Mediaman launched its mobile accessory range under its own brand, Bravishs which it started distributing through telecom channels. However, none of these moves could fetch expected results for these companies, although it gave them some respite.

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