Why Assembled PCs Continue To Flourish


5 Aug 2011
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Despite predictions by several analysts of its impending death, the assembled PC market segment continues to grow. One reason for this is the large demand for assembled PCs which is still coming from smaller cities. The other reason is that many distributors are heavily reliant on the component business for driving their margins, and hence they want to ensure that the market for assembled PCs stays robust.

Analysts believed the white-box PC market would disappear because of the decline in the growth of desktops vis-à-vis notebooks. But distributors such as Rashi Peripherals, Inspan and Cyberstar are much dependent on their component business. In addition, there are several niche distributors such as Aditya Infotech, Ralco Synergy, Digital Waves and Tirupati Computers which are attempting to grow specific product segments.

In the case of Rashi, almost 75 percent of its business is accounted for by building blocks, components and accessories, with the rest contributed by branded desktops, servers, notebooks and software. “Around 90 percent of our bottomline comes from the component and accessories business. If I wanted to double my turnover, I could easily do that by signing on more PC vendors and taking on all their product lines. However, it would seriously affect our bottomline,” reveals Suresh Pansari, CMD, Rashi.

Sudhir S, CEO of Inspan, agrees. “We don’t see any reason why we should stop doing our existing business and graduate to selling branded desktops and notebooks. Margins are already low in our existing line, and it’s even worse in branded PC products.”

Pansari points out that Intel and AMD have been reporting healthy numbers and growth in the domestic market. “Moreover, partners tell us that they make more money as a percent of the bill on selling components than they do on selling branded desktops,” says Pansari.

He also stresses the fact that some of the biggest brands are continuing to drive the desktop business globally, and though they do have a share in making building blocks or accessories for notebooks and other mobile platforms, their bread-and-butter is largely the desktop market. Pansari says that some of the biggest brands such as Nvidia, AMD, Asus, Gigabyte and Creative will not allow their revenue to shrink that easily. “They are world-class brands, and will innovate and reinvent to keep a market growing.”

Many partners who have switched to selling branded computers say that the margin on assembled computers is healthy, and that given the choice they would still push an assembled desktop. “We make somewhere around three percent when we sell a branded laptop, and though we sell few white-boxes, the margins on those are in excess of five percent,” says Sudhir Sankar, CEO of IBS Technologies, Bengaluru.

Meanwhile, the upcountry market for white PCs simply refuses to die. “In Kerala we believe that even today 50 percent of the market is assembled, and there’s definitely money to be made,” comments PK Harikrishnan, CEO of Alltime Power Systems.

Several distributors have also shifted focus to specific market segments, and are staying away from being an authorized distributor of the big PC or software brand. For instance, Tirupati Computers focuses on the high-performance computing market, while Aditya Infotech focuses on graphics, video editing and allied markets.

“We are not chasing huge numbers or revenue. We are quite passionate about the business we do, the brands we represent, and we as well as our partners are focused on bottomlines,” says Abhishek Kejriwal, GM of Tirupati Computers.

Nevertheless, distributors agree that if they want to increase their topline they must sign on large PC, software or peripheral brands. “We have recently signed on with Dell and Acer. Optimal growth includes having a balance of both volume brands and niche vendors,” says Raj Rathi, MD of the Bengaluru-based Cyberstar.

source : crn
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