The Australian notebook market is booming. There are more vendors coming onto the scene with products at cheap prices. However, resellers need not worry because SMB consumers purchase notebooks on features rather than price.

In August, industry researcher IDC Australia released preliminary results that saw the Q2 portable PC market in Australia gain a solid increase of 25 per cent for the quarter and a rise of 53 per cent compared to the same period in 2004. The key factors driving this surge, according to IDC, are pricepoint pressure amongst brand names – the introduction of a sub-$1000 notebook from Acer and HP through BigW, Harvey Norman and OfficeWorks – and an extremely competitive local market which is “bordering on saturation”.According to IDC senior analyst, Michael Sager, this rise in notebook unit sales “certainly wasn’t normal”. “If you looking at the first quarter and the fourth quarter for 2004, it was the back-to-school and work era. However, the market went into decline in the first quarter. Not long after Acer went into the market with a sub-$1000 laptop, HP and Dell, depending upon the week, drove down their laptop prices as well,” adds Sager.
Based on preliminary findings, Sager says, Acer’s 15-inch sub-$1000 laptop outsold desktops for the quarter. Shifting sales away from reseller desktops and into cheap mass retail notebooks is not going to make Acer many friends in the channel, but Sager believes that Acer’s move did not harm the reseller channel. Rather he thinks it created a new market. “They did it in a way that didn’t eat into the reseller channel by going to BigW. Instead of taking more pieces from the pie, they have added new ingredients to it.”
According to Raymond Vardanega, marketing director at Acer Oceania, the notebook market has been heading toward the $1000 mark for a while. “When the US notebook market broke out with a US$999 product, we researched the psychological implications to this price barrier. We found that typically this price barrier sparks people’s thinking process.” Vardanega is quick to point out that this notebook is aimed solely at the consumer market. A lower priced notebook was also released for the SMB market and sold through its traditional distribution channels. “It’s a really important breakthrough for us to work closely with suppliers; we made sure the sub-$1000 notebook was done financially responsibly for our overall business,” he explains.  “We had to differentiate the pure home user from the business user – the two are mutually exclusive. Selling through BigW and OfficeWorks offered us access to new people, new areas and price points.
“Demand for notebooks in the SMB space and the business space has become much more affordable. Many businesses are seen as having employees working from home and working on the road, so our resellers from this sector are very important to Acer,” he adds.
However, not all brand name portable PC companies are eager to jump on the price pressure bandwagon. According to Matt Codrington, product marketing manager at Toshiba’s Information Systems Division, selling a sub-$1000 portable PC is not difficult.
“Anyone can give away PCs. Customers, when they purchase a notebook in the SMB space, look at getting best value for their money. Users will look at what it costs (as well as running costs), look at the real business product, battery life and notebook mobility, security features,” says Codrington. “The driving factor for resellers in this market is the importance in balance. The market needs to be about more than just commodities – reseller’s when selling need to look at who the real winner is and what can they do to make sure they open their doors next week. The market is not about cheap notebooks but the best way to use it.”
According to Sager, the notebook market in Australia is much more competitive than it has been in the past. New vendors are trying to establish themselves and gain an understanding of the market.
“There is not so much market saturation as there is vendor saturation,” he says. “What has happened is that the Australian market has attracted so many vendors. The hitch is that all the vendors have high growth expectations, and unless those vendors can become established they’ll receive heat from their headquarters. What will happen with the saturation is that certain vendors will begin to fall back.”
Codrington agrees with this, up to a point: “I don’t think it’s so much as saturation, but a continuing evolution. Some vendors will succeed, but some will drop off.”
He adds that it is quality and utility that is driving the notebook market in the SMB sector – convergence is also an important factor. “We all use email and convergence extends these capabilities,” he explains. “Users want a notebook that can deliver content and allow them to create their own digital content. The ability to watch a DVD or listen to music is now standard and is creating complex content.
“All this can be done with convergence – it’s changing the way we use technology. The proliferation of broadband creates many security issues and a wireless network can be more secure than a wired network, however most businesses may not understand that yet,” he adds.
Up-and-coming Taiwanese company BenQ also feels that Australian users know exactly what they want when purchasing a laptop.
Simon Liu, BenQ notebooks channel manager says: “Mentally Australian’s want the latest technology from Asia, but they want European quality with Asian pricing. The SMB market is still after quality. Resellers must understand quality because pricepoint is
really for the consumer market.”
Ted Chan, managing director at ASUS – another Taiwanese company rated strongly by IDC – believes the notebook is an individual worker’s ‘weapon of choice’ in the professional field.
“Users aren’t buying notebooks because of price drops. They spend two to three month’s worth of salary on notebooks. The key buying factor isn’t price, its reliability and quality. Quality comes first.” 
“Cheap brings more attention, however manufacturing capabilities are more important. Not all notebook brands are manufacturers.
We sell through resellers; if anything happens with our product we give global two year warranties. We can go and pick up the product from any location and fix it up. Servicing a laptop product is part of the total cost of ownership,” Chan explains.
Sager believes that this is one reason why the growth in the whitebooks market is being stunted. “The whitebook market is
not doing well because people buy those products based on price.
As consumer tastes become more sophisticated, it gets more expensive to build a stable notebook. For BenQ and Asus, it’s easier
for them to build their own notebooks and pick it up and repair it.”
Vardanega also feels whitebook businesses don’t have an easy time making reliable products. “It’s far more difficult to run a whitebook business than a whitebox business – it’s mainly due to logistics. Australian consumers want what is best for them,” he says.
Australian consumers want notebooks that are reliable, wireless and have key features tailored to their individual needs. Now that customers have a range of vendors to choose from, the popularity of notebooks is skyrocketing. The mobile PC might, according to IDC, overtake the desktop PC by 2007. But don’t mourn the death of the desktop just yet – there will always be a place in the market for these products.
Vardanega goes on to say: “[The death of desktop is] widely known and commented on. That is not to say desktops are dead. Mark Twain once said ‘the reports on my death are greatly exaggerated’. The PC is dead, long live the PC – yes notebooks are new and attractive, however PCs are still cheaper than notebooks. Desktops are still an aspect of every business that requires a PC for specific needs. It will become a niche in the marketplace.”
Sager also believes that the desktop will still play a role in the marketplace. “The desktop still has a space, even though the marketplace is dec
lining. As far as the notebook becoming the domain of the home, it is a very safe bet to say it will be a critical piece of the home. To date, notebooks have been a push factor (often unbeknownst) for consumers to push wireless networks in the home. That is slowly beginning to change and in the future the growth in broadband and wireless in the home (eventually WiMax) will be a significant
driver for the notebook space.”