Notebook PC buyers get more for their buck

By Staff -- Purchasing, 2/22/2001

Falling component tags led Dell Computer to cut prices on some of its Latitude notebook PCs by up to 20% in December: Its new Latitude C600 and C800 models-with integrated wireless-ready networking capability-are now selling for up to 9% less than they were late last year.

And, according to Mostafa Maarouf, senior analyst, mobile computing, Dataquest Inc., a unit of Gartner Group Inc., corporate buyers can expect more of the same in 2001: Lower prices for greater computing power. "We'll see notebook prices come down more to trigger new sales," says Maarouf.

Triggering new sales is key to strategies of some computer OEMs. After taking a dive at the end of 1999-due to Y2K-related fears among corporate buyers-sales of notebook PCs started to pick up again after the first of the year, with 2000 ending on a high note. Still, as Maarouf points out, increased demand for notebook PCs in 2000 is not indicative of future growth.

Compaq Computer, for one, experienced strong sales growth in 2000, especially in the second and third quarters, according to Matt Mazzantini, Armada business manager. In the fourth quarter, Mazzantini says, corporate buying slacked off a bit due to the downturn in the stock market.

As Dataquest's Maarouf sees it, there will be challenges for computer manufacturers in 2001. For one, the industry is starting to show signs of saturation. In other words, basically everyone who needs a computer has already purchased one. (Typically, IT departments call for an upgrade of a corporate notebook platform once every two years, which Maarouf notes is starting to extend out to three years.)

Still, many corporate buyers are beginning to see the notebook as a viable alternative to the desktop. Traditional price differentials are eroding, as performance continues to improve. Now performance in such areas as computer memory is seen by buyers as sufficient for corporate users. As such, they can make a strong case for purchasing a notebook PC to replace a desktop. What's more, work-from-home policies allow more employees more mobility. Technology enables employees to dial into a corporate LAN (local area network) from a remote location.

Technology explodes

"Wireless access is exploding," says Compaq's Mazzantini. "In the next 12-18 months, we expect to see more and more corporations going wireless." As such, R & D investment in wireless technology is a big focus for Compaq. With its next generation of notebook PCs, which will be introduced this spring, the computer company is making available a new MultiPort option that provides users such wireless access.

Dataquest's Maarouf expects notebook computer makers to look to the small to midsize business sector for new sales, an area in which demand for the mobile computers has grown in recent years. Another area Maarouf sees as ripe for new growth: the Latin America and Asia Pacific regions.

In this country, computer OEMs also are targeting a growing consumer market, especially those who are more budget-conscious such as the college student population. Wireless LAN technology is seen by market researchers as an option especially attractive to college students who with PCs can access the Internet from such remote sites as coffee shops and cafes. IBM, in fact, is marketing its new I series notebook PCs with wireless LAN to the budget-conscious consumer.

Equally as compelling an option to corporate buyers, wireless LAN allows users to roam corporate campuses with their notebook PCs. For the corporate market, Dell's Latitude C600 and C800 both include a built-in antenna connecting to the MiniPCI bay enabling integrated 802.11b wireless local area networking with an optional radio component.

As evidenced by Dell's move to lower prices at the end of last year, computer manufacturers continue to reduce tags in line with falling component prices. One key supply issue that may plague OEMs is a limited supply of LCD (liquid crystal display) panels used in monitor manufacturing.

After slight price reductions in the first quarter, Compaq's Mazzantini sees pricing stabilizing with the introduction of new technologies. "Buyers will be getting more for their money," he says.

Twenty percent growth forecast

Maarouf estimates the worldwide market for notebook PCs in 2000 to be roughly 25 million units (both corporate and consumer). He says that it's unlikely that the corporate market will see 20% or more growth in 2001. What may be likely is further consolidation of the market as some of the smaller players get squeezed out by the competition.