It’s consolidation time

The notebook market front runner, HP, is confident that it will be able to sustain its lead in this space. However, as more players enter this segment, it will get tougher to outsmart rivals and maintain its share, says Atanu Kumar Das

The notebook market is in the midst of an unprecedented boom. According to IDC, the notebook market grew by 117 percent in 2004 and it’s expected to grow by nearly 100 percent in 2005. HP has been leading the commercial notebook market from the beginning, and the company today commands a 33 percent marketshare. Its challenge today is to sustain its market position as unit sales in the notebook mart double every fiscal.

According to P Raghuraman, Country Manager, Business Notebooks, Hewlett-Packard India Sales, “We are aware that the notebook market is becoming increasingly competitive. This year, in February, we made sure that we held on to pole position when we launched nine new notebook models for the enterprise segment.”

The three things that HP did differently while launching its latest batch of corporate notebooks was that it stressed on ease-of-use, reliability and security. “We realise that if we do not enable our customers to use the technology with ease, we are not justifying our efforts. So this time, we made sure that every new feature that we add is customer-centric. We also introduced special reliability features and a mobile data protection system that ensures data security,” he says.

HP launched two models in the 6100 series priced at Rs 39,990 and Rs 59,990. The former runs on Celeron, and the latter, Centrino. In the 200 series, the company launched a notebook priced at Rs 79,990. In the 4200 series, it launched two notebooks priced at Rs 89,990 and Rs 99,990. The higher-priced model is a tablet PC. In the 8200 series, HP unveiled two notebooks priced at Rs 99,990 and Rs 1,49,990 (dubbed a mobile workstation). Finally, in the 1100 series, the company launched its flagship tablet notebook, which weighs 1.4 kg and costs Rs 1,49,990.

This launch took place after 18 months as HP considers 2005 to be the year of mobility, and India is one of the fastest-growing markets in terms of notebooks.

A booming market

The notebook PC segment displayed an explosive growth, driven by corporate and government demand. The increase in run rate business was also crucial to the increase in the overall numbers. According to IDC, notebook sales (by volume) in India grew nearly 87 percent in AMJ 2005, compared to the same quarter a year back. HP emerged the leader with nearly 33 percent marketshare. IBM also recorded good growth and was the runner up with a 26 percent marketshare in unit terms during the same quarter. Acer and Dell are placed neck and neck in the third and fourth positions with the former having 10.6 percent marketshare and the later 10.5.

The market for notebooks grew on account of a revival in investments, increased capital expenditure and aggressive price war on part of the vendors. The Indian notebook market has witnessed a paradigm shift. The way notebooks were perceived, purchased and marketed has changed. Buyers have started considering notebooks as an alternative form factor, thanks to the erosion of prices of entry-level models. Large enterprises have been the principle buyers of notebooks.

It is interesting to note that although entry-level notebook pricing has created a lot of noise in the market, the majority of the gains in sales took place in the Rs 70,000-80,000 category which accounted for a third of the market in 2004-05, up from 15 percent in the previous fiscal. That said, sales of sub-Rs 50,000 models have shot up a hundred fold to account for 9 percent of the overall unit shipments.

Sustaining growth

For HP, the crucial issue is how it can sustain its growth. All the more so because IBM (now Lenovo) is a strong contender for the top slot. According to Deepak Advani, Senior Vice-president and CMO, Lenovo, “ThinkPad is a well-known brand among enterprises and we will try to leverage that brand name. We will go all out for the number one title.”

Raghuraman is aware of ThinkPad’s recognition. “We have been countering them for quite some time now and we are aware of their potential. So, this time with our new launches, we have made sure that we are both price competitive as well as feature rich. I am absolutely certain that we would be able to sustain our growth and position in this country,” he adds.

According to Sanjit Sinha, Senior Manager, Hardware Research, IDC India, “In the last two years, we have seen that 90 percent of the overall notebook market has been divided between the top five vendors—HP, IBM, Dell, Acer and Toshiba. The remaining 10 percent is divided between the smaller players such as Fujitsu, Sony, Samsung and others. Now, this scenario is expected to change as there are more vendors coming into this segment (Zenith), which are planning to launch their notebooks at competitive prices. Then there are vendors such as Ingram Micro, HCL, ACi and also Sahara in the pipeline. Now, there will be a push from these vendors, and they are bound to have more than 10 percent of the market sooner than later. This makes the market even more interesting as we recently saw Toshiba launching entry-level notebooks because they are the ones among the top five vendors which have been losing marketshare in the last two years.”

Ramanjeet Singh, Country Product Manager, Note PC, Samsung India, gives the perspective of a challenger in the notebook segment, “The notebook market is dynamic and every quarter some players are losing share, while some are gaining. With so many new players entering the notebook space, we are bound to see some changes that would happen and the key to retaining marketshare is innovation.”

Sinha also states that competition will get more aggressive between the top five vendors as Toshiba wants to increase its marketshare, and with smaller players getting more prominent, there are bound to be changes.

Reach is the key

One of the positives that HP has is its channel reach. “We are present in every nook and corner of the country. We have more than 550 partners, and we are hopeful that they will be able to sustain our growth trajectory in the coming years,” Raghuraman says.

HP has also launched various channel promotion programmes which ensure that the partner’s profitability is taken care of. The most successful campaign has been the Moghul Monarch Programme. This enables every partner to participate and get rewards based on the kind of performance they show over a period of time. “We are successful with the Moghul Monarch Programme and channels have responded positively. It has been successfully running for the last three years and more such schemes will be on offer for our partners,” Raghuraman adds.

The company plans to increase its reach of channel partners in the coming years. It will appoint exclusive partners for the commercial notebook market in the coming fiscal.

Riding on security

HP feels that security is a primary concern for enterprises when they plan to buy a notebook. The concern could be hardware theft or loss of data. HP has introduced mobile data protection system, local recovery software, protect tools security solutions and enhanced drive-lock in all its recently-launched notebooks to ensure that users are fully protected from any loss that they may face due to theft or hacking. “Security is a priority for an enterprise today, and we are ensuring that we have all the features that ensure data protection either from the software or hardware perspective. We hope that we can ride on our security features and make further inroads into the market,” Raghuraman mentions.

The road ahead

With more vendors getting into notebooks, the market is going to get more competitive. HP has drawn strategies to ensure that it does not slip down the ladder and stays price-competitive. Even after the implementation of value-added tax (VAT), the company has not increased its notebook prices. “By being price-competitive, we are ensuring that there is no roadblock to our growth map and in the future too you can expect HP to be price-competitive. We want to cater to every strata and so will always have an offering that suits the need of SMBs, SOHOs, and medium and big enterprises,” comments Raghuraman.

Based on its past performance, HP’s likely to stay on top though it will face a tough fight from Lenovo’s ThinkPads. As more vendors compete for the same market, it will become increasingly difficult to own a third of the market.

atanu@expresscomputeronline.com