Hard drive market squeezed as PC sales fall

TORONTO – It’s been sour times for hard-drive vendors.

Sales are slumping, demand is down and the outlook from a variety of sources appears dim at best. Between consolidation of select hard-drive makers, increased storage capacity and lower prices for PCs, profit margins have shrunk.

“It’s the worst I’ve seen, but then again, I’m not privy to what went on in the early eighties,” said Steve Baker, an analyst with NPD Intelect in Reston, Va. “PC sales today are down tremendously by as much as 20 per cent per month over the last year and a half. I don’t think the back to school drive is going to change that.”

Baker said he doesn’t foresee the situation turning around anytime soon. However, he did suggest the launch of Microsoft’s Windows XP and the coming Christmas shopping season could boost fortunes somewhat.

“Next year doesn’t look a lot better but I don’t think we’ll see the same rate of decline,” he remarked.

Baker added that while PC sales are in a flux, computer peripheral sales have grown significantly in the first half of 2001.

“What VARs need to do is the same thing they’ve talked about all along, and that’s diversify. Don’t solely focus on selling hardware, especially big iron hardware,” he continued. “VARs should really be a source for purchasing consumable supplies, for getting advice and support.”

Alan Freedman, hardware analyst for IDC Canada in Toronto, said that while IDC’s enterprise disk storage figures indicate an eight per cent growth from 2000 to 2001, the PC market is still spiraling downwards.

“The disk market is in for rough times and the PC market is in severe decline,” he said. “The PC market was in decline before, but it’s accelerating now.”

Freedman also noted that high-end computing systems are not being sold currently, meaning lower profit margins for vendors and their channel partners alike.

“For a VAR that means doing more than packaging hardware; they have to make a business case that’s attainable and one that demonstrates a solid return-on-investment,” he said. “They (channel partners) have to show their clients how their business will be affected by adding more storage.”

As December and the holiday shopping season looms, Dave MacDonald, COO for Toronto-based Softchoice Inc., said there’s little to fear.

“We’re still seeing customers seeking productivity solutions, desktop rollouts, server exchanges, at a decent rate,” he said. “Concerns over security has also supported us through the sales of firewalls and antivirus software.”

Softchoice is coming off its most successful quarter in the company’s 11-year history, Macdonald added.

“About 75 per cent of our revenue comes from the United States and of that, the majority is in the small and mid-sized business market,” he said. “We invest in our people and our technology and we train quarterly to differentiate ourselves.

“I think XP will show a spurt in the market and I think we’ll see a good shopping season this Christmas.”

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Jim Love, Chief Content Officer, IT World Canada

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