Weak economy takes toll on Canadian PC industry

An already softened economy and the aftermath of Sept. 11 combined to push Canada into a “PC recession” during the last quarter, according to a report released Wednesday.

Toronto-based research firm IDC Canada says overall PC shipments fell 17.5 per cent versus the third quarter of 2000. Consumers led the charge away from PC purchases, with shipments of home PCs down 26 per cent. But shipments in the business sector also dropped 10.3 per cent.

Besides the economic body blows North America sustained over 2001, John Stanisic, hardware research analyst at IDC Canada in Toronto, also blamed growing consumer market saturation and a less pressing need among business customers to upgrade their ageing equipment, what he dubbed the “good enough” factor.

“When times are tough, and you’re looking at the IT market from a high-level . . . one of the first areas to get cut is hardware,” Stanisic said. “It’s a lot easier for people to make do with existing PCs.

Although the PC market showed signs of weakening throughout 2001, the immediate impact of the Sept. 11 attacks in the U.S. only made the trend more pronounced, said Stanisic. “On the commercial side, the whole idea of business as usual was interrupted for a few days, so decisions on IT were pushed out.”

Ayman Antoun, director of IBM Canada’s personal computer division in Markham, Ont., said the company’s original revenue expectations for 2001 were high, but intense price wars among PC vendors, combined with recent world events made for a tougher than anticipated year.

“The slowdown is more painful (to us) on the commercial side of the business,” Antoun said, adding that IBM participates in, but doesn’t seek to deeply penetrate, the consumer market.

Still, he said the slowdown is more a reflection of short-term strategic thinking among its business clients. “It’s not that customers are stopping or canceling their spending,” Antoun said. “They’re deferring the spending. A lot of it is, ‘let’s wait and see what’s going to happen in the economy.'”

Stanisic said the recent flurry of layoff notices have also contributed to slumping computer sales – fewer employees mean more unused PCs sitting on empty desks, and, therefore, less pressure on employers to buy new equipment.

Not all segments of the PC industry were hit equally hard. For instance, while shipments of desktop PCs dropped 23.7 per cent versus the third quarter of 2000, shipments of notebooks actually grew 5.4 per cent. IDC attributes that to the shrinking prices and improved performance of notebooks compared to desktops.

As well, sales of Windows-based servers remained relatively strong, up 12.5 per cent in the last quarter.

Although its marketshare dropped 12.6 per cent from Q3 2000, IBM Canada Ltd. sat atop the PC vendor pack in Q3 – but only barely – with a 16.6 per cent share, according to IDC. Dell Canada, the only vendor that demonstrated growth (2.4 per cent) earned 16.5 per cent marketshare. “For all intents and purposes it’s a tie,” Stanisic said.

They’re followed by Compaq Canada Corp. with 13.3 per cent marketshare, down 26.7 per cent and Hewlett-Packard (Canada) Ltd. at 8.7 per cent, down 20.1 per cent.

Toshiba of Canada Ltd., however, saw its marketshare grow 45.9 per cent, which IDC attributed to a range of new products and “aggressive” pricing.

Antoun said he’s already seeing positive signs in the early weeks of the fourth quarter, which, if they develop into a trend, could bode well for 2002. “I’m very encouraged by the number of projects that got delayed in the third quarter that are being accelerated in the fourth,” he said.

“We’re starting to feel good about the pickup we’re getting from October.”