While prospects for a surge in near-term PC sales remain dim, flat-panel LCDs appear to be the one bright spot for solution providers. Plummeting prices and improved features are moving the products beyond status symbol to become a viable alternative to aging CRT monitors.
Until recently, the least expensive flat-panel display suitable for a business environment cost nearly $1,000; now it can be had for about half that amount, according to iSuppli/Stanford Resources, a market research firm based in San Jose, Calif. More dramatically, higher-end systems that cost $4,000 a year ago are now available for $1,300. And the sweet spot for corporate buyers,17-inch LCDs,bottomed out last quarter at $739, compared with their $1,148 price tag a year earlier.
Even more good news: The number of flat-panel LCDs expected to ship in the United States this year will more than double from last year's 3.9 million to 9.8 million units, according to iSuppli/Stanford. Down the road, flat-panel displays are expected to surpass CRT sales by 2006, accounting for 65 percent of the $88 billion U.S. market for monitors, according to DisplaySearch, a market research firm based in Austin, Texas.
Analysts say many IT managers who were considering upgrading to 19-inch CRTs are instead going with lighter and slicker 17-inch LCDs, whether as part of an entire system overhaul or just monitor replacements.
"In some cases, PC upgrades are being put on hold and enterprises are just upgrading the monitors," says IDC analyst Bob O'Donnell.
In fact, Len Carter, president of International Global Systems (IGSI), a solution provider based in Las Vegas, says 70 percent of the LCD monitors he's selling are replacements rather than parts of computer bundles.
"People are just not buying PCs at the rate they were before," Carter says. Research from VARBusiness' IT Spending and Strategy survey confirms that: A majority of end-user respondents say they have either lengthened or kept the same their typical PC hardware upgrade cycle (see our April 29 issue).
Those who are replacing PCs,primarily larger businesses,have found the cost of computers has come down enough to justify an extra few hundred dollars for LCDs, arguing that power savings over the lifetime of the display, the smaller footprint and improved productivity will make up for the added cost.
"The bottom line is people like the way they look, and then they come up with justifications [for buying them," O'Donnell says. "It's not always that blatant, but in some cases it is. If you do the ROI, an LCD is a better investment than a CRT."
What Goes Down%85
Those holding out for even further price cuts, however, may be in for a rude awakening. As overall LCD prices went into a free-fall last year, demand escalated faster than manufacturers could respond. Because many OEMs had cut the cost of their panels heavily to spur demand, many delayed expenditures on new manufacturing facilities required to make them, Young says. Where surpluses were once 20 percent of output, now they're down to less than 5 percent, says Ross Young, DisplaySearch's president.
"The days of paying $299 for a 15-inch flat-panel display are over," adds Erin Rippee, vice president of marketing for KDS, Garden Grove, Calif. "I think you'll see them [entry-level at $399 by the end of the year."
Rhoda Alexander, iSuppli/Stanford's director of monitor research, notes price increases could last more than a year. Nevertheless, she doesn't expect that to significantly affect sales, though it could curb interest for those with less room in their budgets. What's more, corporations are leaning toward 17-inch units, which are not likely to increase in price as dramatically as 15-inch LCDs, she adds.
Solution providers can help corporate buyers justify the premium cost of LCDs over CRTs, vendors and analysts say. The current crop of flat-panel LCDs, for example, offers improved performance, with the added benefits that they're lighter, not subject to electromagnetic interference, don't glare and lack the flicker of tubes. They have higher resolutions, brightness levels, contrast ratios and refresh rates, with richer color saturation and improved form factors that make it easier for customers to adjust and move them around. Lacking the dead pixels that were prevalent with older flat-panel displays, existing models also rival the quality of CRTs; office workers who use spreadsheets and presentation applications can easily swivel the displays between landscape and portrait modes.
Other features are finding their way into LCDs, as well, including built-in speakers, television tuners, USB hubs, support for wider viewing angles, pivots that can adjust a monitor for any scenario and thinner bezels that allow customers to cascade multiple displays. Another frequent request by IT managers is support for remote diagnostics.
"One of the things [customers are looking for is intelligence in models that helps them fix the monitor without going to the desktop," says Al Giazzon, vice president of marketing at NEC-Mitsubishi, whose LCDs accounted for a market-leading 15 percent of all sales in the United States last year, according to iSuppli/Stanford.
There's also a reasonable argument that LCDs can help large organizations cut their costs, notes Rey Roque, vice president of marketing at Samsung Electronics USA's Digital Information Technology Division. His unit manufactures the SyncMaster line of flat-panel displays and is an OEM supplier to four of the six largest PC makers' branded monitors. Roque says a high-performance CRT can consume 120 watts, compared with 30 watts typically used by flat-panel LCDs.
"When we talk to enterprises, we show them that [LCDs have a 4-to-1 improvement in power savings," Roque says.
In addition, he says, LCDs can significantly outlast CRTs. "After typically 10,000 hours of use, CRTs have half the brightness they started with," Roque says. "It's a gradual process. The bulbs in the LCDs are rated to last 25,000 hours, and some go to 50,000 hours. All of that helps pay for that premium."
IDC's O'Donnell points to less tangible justifications, such as improved ergonomics. "Some people feel the
larger, crisper images cause less eye strain," he says. "You can't put dollars and cents to that, [but people feel it's important.
NEC-Mitsubishi positions LCDs to solution providers as a way to differentiate their PC offerings. The margins are not higher than those for CRTs, but the overall sale is higher as part of a larger solution bundle, says Lance Wand, an account manager at Modern Business Technology, a solution provider based in Madison, Wis.
There are about two dozen third-party suppliers of flat-panel LCD monitors. For those buying new PCs, that begs the question,why not go with what the vendor offers? Compaq, HP, IBM and others offer numerous models for corporate customers.
"Depending on the size of the buyer's company and the amount of business it does, a customer can get as good a monitor, or better, for less money than going with the manufacturer's model," says John Marzi, account executive with Amherst Corporate Computer Sales and Solutions, Merrimack, N.H.
With larger orders, though, vendors such as Compaq are known to offer aggressive pricing and/or discounts for high-volume orders.
"Compaq caters to larger customers, so smaller customers fall through the cracks," Marzi says. "The small customer is apt to go with the best value or what the VAR recommends."
Yet there are distinct advantages to sticking with the PC vendor's monitor offerings, no matter what your customer's business size may be, solution providers say. For one, the cost of the monitor adds to the overall price tag of the system, giving the VAR a higher level of status with the PC vendor. For the customer, it means one warranty for the entire PC system, says Tim McGrath, executive vice president at Comark, a solution provider based in Bloomingdale, Ill., that sells almost every major third-party monitor and also carries major PC lines.
"When you start to bundle warranties and look overall across an enterprise, the ability to consolidate vendors offers significant advantages," McGrath says. When Comark sells IBM PCs, almost all come with IBM's monitors as well, McGrath says.
Customers may prefer a single vendor solution as well. "We are not always the cheapest, but the integrated solution is a key differentiator," says Alex Liff, HP's LCD product-line manager. Adds Mickey Mantiply, marketing manager for IBM's flat-panel displays, "If there's a failure, you've got one phone call [to make."
Third party or not, the differences in basic displays are negligible, solution providers say, noting only slight variations in such crucial tangibles as viewing angle, brightness and contrast ratio. Most, if not all, 15-inch monitors have a standard 1,024-x-768 pixel resolution, while 17-inch displays offer 1,280-x-1,024. Other important factors to look for are contrast ratios,most are at least 300-to-1, though Samsung has rolled out SyncMaster 171MP, a 17-inch LCD with a 500-to-1 contrast ratio,and panel type,most are active-matrix, thin-film transistor (TFT) and offer response times of 25 milliseconds to 30 milliseconds.
In the end, service and strong relationships tend to dictate what monitor is recommended, according to solution providers. "To be honest, the differentiation becomes service," IGSI's Carter says.
For example, he says, NEC-Mitsubishi and ViewSonic have comparable products. But, he says, he finds NEC-Mitsubishi to be more responsive.
Dariush Dehdashtian, administrator at Advanced Micro Technology, a Newport Beach, Calif.-based VAR, feels the same about ViewSonic, which won first place in VARBusiness' 2001 Annual Report Card category for display technology (see our Oct. 1 issue or www.varbusiness.com
"What impresses me about ViewSonic is the quality of its displays and its customer service. It is very loyal to its product," he says.
Flat screens also offer VARs opportunities to add services, such as mounting the monitors on walls. In addition, VARs can help customers decide whether to pick a monitor that supports digital technology. Though most do, they require PCs with digital outputs, such as DVI or a third-party card. Eventually, PCs will only come with digital-display outputs.
"The digital signal not only allows you to have a better picture, it's also more secure," Carter says. n