October 13, 2006 ASBIS in Media

IT Europa:Czech PC industry breathes sigh of relief

Two years ago, when we last visited the Czech Republic for a national survey, the PC market was becoming startlingly mature, and resembling a western market in all but name. Growth of PC unit shipments was slow, as a result of a saturated market – a population of 10 million were managing to buy 500,000 PCs a year. But sales growth has really picked up in the last year as vendors tap into the lucrative retail sector, and small businesses start buying notebooks. IT Europa assesses how the market is shaping up for 2007…

A-brands are known to be commonplace in the advanced IT space in the Czech Republic, in both the consumer and the small-tomedium business environments. In terms of market positions, the top-five chart reads like a catalogue of names one might expect to find in markets such as Germany, the UK, France and the Nordics. Acer and HP are numbers one and two respectively in the rocketing notebook market, selling 106,000 and 101,000 PCs in 2005, according to numbercruncher Dataquest, with Dell chasing, albeit some way behind, at 66,000 units. After that there is Fujitsu Siemens, which has a clear high-end retail presence for notebooks, and Asus hits in at the lower price range, where it sees the Czech Republic as one of its key markets. Lenovo is growing in the market, with a strong resell presence based on partnerships formerly established by IBM.

The growth of Acer and HP in the Czech Republic has been nothing short of startling, particularly in the notebook arena where Acer has a crushing 39pc marketshare, HP has 29pc, and mean-machine Asus has gobbled up 10pc. Notebooks are the in-thing in growth terms, but desktops naturally prevail in many homes and businesses, and A-brands do not want to lose out. Acer, for example, may trail in desktop sales, but it boosted desktop unit shipments from 6,400 in 2004 to 14,400 last year – a 225pc increase. ‘We have such a strong notebook channel to SMBs that we’ve been able to challenge the big guys on desktops,’ Tomas Cech, country manager at Acer, tells IT Europa.

The Czech Republic is a major source of business for Acer, which has a large repair facility in the Czech city of Brno, serving domestic customers as well as those in Slovakia, Hungary, Poland and Austria. Cech claims Acer’s channelto- market there is ‘slim and adaptable’, reacting to changes in customer demographics. ‘The customer structure is changing,’ he says. ‘We now see a lot of couples and professionals buying notebooks.’ He adds that Acer tries to make sure its channel is structured well to maintain growth, explaining: ‘We try to ensure good incentives like a 10pc to 12pc margin on our higher-end products.’

Pavel Machovsky, PSG channel boss at HP’s Czech office, agrees: ‘There is a clear shift from no-name PCs to brand names. ’ HP is established in notebooks and LCD displays in the market, and is working to increase its desktop and server sales. It also began this month to sell consumer-targeted notebooks, for the first time in the country, and Machovsky explains: ‘This is primarily driven by a general increased interest in notebooks, as well as a huge boom in fast internet access at home.’

Careful structure of distribution has helped lead Acer and HP to the top of the PC table. Acer works with five of the highest-revenue generating distributors in the market, namely eD’system, AT Computers, Tech Data – Ingram Micro has yet to enter the country – BGS Levi, and SWS. Five distributors in a market of 10 million people would normally be counted as an excessive ratio, but Cech maintains that a broad distribution is the wiser option. ‘Sure, we could live with one less distributor,’ he says, ‘but with the particular geographic and customer structure issues here, we need a wider channel and it gives sales more stability.’ HP uses AT Computers and BGS Levi to drive it into the retail arena, and eD’system and Tech Data to enable it to target SMBs.

Speculation continues as to whether Ingram Micro has designs on the market, but the broadliner has, so far, yet to make a move there. ‘For any distributor to start here, it would need good vendor support,’ suggests Cech at Acer, pointing out the high number of distis already established in the country. The biggest move in distribution, though, has been last year’s merger of distribution and assembly giants Levi of the Czech Republic and BGS of Slovakia, which has also rocked the PC assembly market, and this has created a force to be reckoned with.

Machovsky at HP explains: ‘Levi used to be a subdistributor for BGS, and it continues under the BGS Levi umbrella to serve small dealers that also assemble desktops. The acquisition was a smart move because it made Levi able to continue to address proximity partners while having the scale to carry major brands like HP.’

He adds that having access to both markets makes sense, as European Union expansion has led many distributors to address both the Czech Republic and Slovakia in one fell swoop, and a number have thrown Poland into the bargain too.

There is much talk of wholesalers looking to buy rivals in the market.

Armand Koten, country sales director at ASBIS – which claims to be the largest HDD disti in the country with annual sales of over 250,000 units – says: ‘I believe it is more likely that there will be some acquisitions within the Czech and Slovak markets, than another distributor entering the country – this is because we’ve been part of the EU since 2004 and there’s been plenty of time already for that to have happened.’

He does add, however, that he would not completely rule out another distributor coming in.

Components distributors such as ASBIS and ELKO continue to benefit in a market with so many PC assemblers. ASBIS, for example, serves over 40 system builders with technology for PCs, notebooks, and servers, and claims to be the top provider of Intel products to the assembly channel. These wholesalers are making a conscious move to notebooks, as market demands increase for mobile technology, and Koten explains: ‘Last year the market was flat in PC terms and had double-digit growth on notebooks.’

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