ty - stock.adobe.com
The PC market had a tough end to last year and started 2023 in the same vein with the first four weeks continuing to deliver declining unit sales.
An analysis of the bulk of January trading from Context, which gathers numbers from distributors across Western Europe, revealed that notebook unit sales dropped by 44% and desktops by 23% year on year (YoY) in the first four weeks of the year.
Fragile consumer confidence and downbeat commercial business spending took their toll and are set to feature for a while.
“Revenues also fell sharply as a result of the drop in demand driven by the economic climate, geopolitical uncertainty and the cost-of-living crisis,” said Marie-Christine Pygott, senior analyst at Context. “Education deals have dried up since last year, making comparisons unfavourable.”
The channel is continuing to work through high inventory levels and has got to a position where it is now down to 10 weeks’ worth, compared to 20 to 30 weeks’ worth six months ago. Those levels have been reduced through a combination of promotions and heavy discounts in the second half of last year.
Context has been tracking inventory levels and there are still pockets of low-end notebooks in distribution that is sitting alongside other ageing stock. The costs of storing those products is rising and has led to some caution by disties around loading themselves up with further hardware products.
Another theme that has emerged is the pressure on the SME-sized channel to deal with rising costs and keep an eye on cash flow, which are added challenges to the declines in PC unit sales. Gaps in revenues from notebooks are not as high for retailers and e-tailers because they are not as reliant on commercial sales.
However, there is some light at the end of the tunnel, with the expectation of an improvement that is anticipated by Context.
At the end of last week, as he spoke to analysts about its Q3 results, Yang Yuanqing, chairman and CEO at Lenovo, said there were reasons to be optimistic about the prospects for the market in the longer term.
“We believe the PC market might stabilise sooner than many expect, and we continue to drive the efficiency in our already linked operations, maintain healthy cash position and invest in innovation and sustainability,” he told analysts.
“Despite the low IT market growth in the short-term, total IT spending is expected to recover to our moderated growth rates in the mid- to long-term.”
Context is also expecting the market to recover, although it might be deeper into 2023 before that starts to filter through to the channel.
“The drop in PC sales is to be expected given that the economic downturn is worse than was anticipated a year ago,” added Pygott. “The volatile geopolitical situation is causing businesses to pause investment while consumers continue to suffer from inflation and high energy prices.
“However, there’s still room for optimism: we can expect product refreshes and pent-up demand to pick the market up by the end of the year, and in particular in the course of 2024.”