Feeds

Channel faces cash crisis

Very tough Q4

  • alert
  • submit to reddit

3 Big data security analytics techniques

Resellers in Europe and the US are bracing themselves for a very tough Q4, amid signs of a "significant weakening in corporate purchasing plans" on both sides of the Atlantic.

The US is particularly hard hit, but the European market could be "decelerating at a pace similar to the deceleration found in the U.S. a year ago". Entire sectors, especially the airline industry, are in liquidity crisis, post September 11, and this means that IT budgets, following an already difficult year, are under even closer scrutiny.

Weak demand will translate into more pricing pressure, and could even provoke a cash crunch in the IT channel, which has little room for manoeuvre, as it already operates on razor-thin margins.

These are some conclusions from the Channel Tracker report, a quarterly survey of c.500 IT industry players, which collectively account for 65 per cent of PC shipments worldwide, compiled by Global Touch and Morgan Stanley.

The survey monitors demand, vendor outlooks, pricing and inventory levels, and its most recent version covers the period to Sept 30, 2001.

Unless sustainable volumes return, the report concludes, the "combination of lower volumes and lower margins could create a domino effect of liquidity problems that would ripple up and down the supply chain of the IT industry".

So what is to be done? The most obvious solution, as GlobalTouch points out, is for vendors to assume more of the risk. Currently, disties act as mostly unpaid bankers to the reseller sector.

Tiny margins means significant risk if a customer goes bust, especially at a time when bad debt insurers are very unhappy to get their hands dirty with the computer industry. If you are a distie on five per cent gross margins, you need to bill an extra $1m if an uninsured customer goes bust with debts of $50,000. The sums don't add up.

Reseller margins on product sales are also laughable - wealth and liquidity is locked within the vendors. Few vendors want to sell direct, but they will have no choice unless they change their attitude to financing e.g moving from reseller models - where dealers and disties take title on goods - to agency models, where the channel earns a fee for their services.

Finally we enter one caveat with the survey results: Dell is such a major player in the IT products industry that its absence skews perceptions. Add in Dell, and results may not look quite so terrible. And isn't Dell a reseller - it is after all the biggest assembler for Intel, for example. ®

Here is more happy reading from the Channel Tracker Survey

  • Over 60 per cent of the participants in both the US and Europe reported that third quarter sales were below expectations.

  • Almost 90 per cent of respondents said that US third quarter sales would be flat or below Q2 sales (ending June 30, 2001), while 75 percent had the same feeling about European sales.
  • A significant number (57 per cent) of respondents reported that planned U.S. customer orders of PC servers were cancelled or postponed during the third quarter. Only 18 per cent reported a similar situation in Europe.
  • Sales of PC desktops and servers appear to be hardest hit in the US, with over 50 per cent of respondents citing that they were below expectations.
  • In year-to-year comparisons for the third quarter, revenues are down further in the US than in Europe.
  • An extraordinary number of UNIX server sellers (84 per cent) say that sales have been below or "extremely below" expectations in the US, while 52 percent have the same results for Europe. Sun Microsystems, in particular, was noted as the revenue growth laggard, where IBM was the leader.
  • In another key area, enterprise storage revenues are below expectations in the US (84 per cent), but in line with expectations in Europe(73 per cent). However, 60 per cent of US respondents and 72 per cent
    of European respondents expect to see enterprise revenues increase in the fourth quarter.
  • In the battered networking segment, sales at 3Com and Enterasys Cabletron) appear to be the hardest hit by the downturn, while Enterasys' and Cisco's inventories appear to be higher than normal.
  • The survey also showed that 41 per cent of US respondents and 69 per cent of their European counterparts expect networking revenues to have a meagre single digit growth in units in Q4 2001.
  • Channel partners expect US prices to be competitive to "very competitive" in the fourth quarter, especially in the areas of enterprise storage and ink jet printers.In Europe, pricing will be somewhat less competitive compared to the U.S.
  • In Europe, Compaq appears to have the highest inventory levels of PC desktops, while IBM has the greatest inventory of laptops.
  • Year-to-year US revenue projections for the fourth quarter are expected to be flat or down for all of the major PC desktop vendors, including Apple, Compaq, HP and IBM. Projections for Europe are much stronger with most expecting moderate to very strong growth for the same vendors.
  • In laptops, a similar situation is expected in the U.S. with flat or negative growth for the fourth quarter. Results for Europe show a mix of expectations for laptop sales, with less pessimism compared to the US
  • Revenue projections for the US server market show flat growth for Compaq and HP and moderate growth for IBM. In Europe, all three vendors can expect at least moderate growth.
  • Growth in printer sales is expected to be stronger in the US than in Europe.

Combat fraud and increase customer satisfaction

More from The Register

next story
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Record labels sue Pandora over vintage song royalties
Companies want payout on recordings made before 1972
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
Number crunching suggests Yahoo! US is worth less than nothing
China and Japan holdings worth more than entire company
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.