Survey: Channel Companies Brace For Rough 2002

Lack of end-user demand, margin compression and declining average selling prices will have a significant impact across the entire supply chain, according to the research firm's Channel Tracker survey of almost 500 IT companies.

"If the greatest challenges on the IT industry remain economic in 2002, the survey respondents believe that recovery will take place starting in the third quarter," said Denise Sangster, president and CEO of Global Touch, in a statement. "On the other hand, if political uncertainty becomes a key focus, then all bets are off as to this year's performance."

Although the Sept. 11 attacks weakened an already-struggling IT market, serious imbalances in the supply chain pose a greater threat, Sangster said.

"With pricing and margins under pressure, the net impact is that channel partners are facing huge financial challenges, causing them to shift from 'how do I sell the latest technology?' to 'how do I keep my company viable and out of bankruptcy?' ' she said.

Almost 50 percent of U.S. channel partners saw manufacturers discount prices in the fourth quarter, mostly in the desktop and server markets, according to Channel Tracker.

"Manufacturers were willing to sacrifice their relationships with channel partners in the last quarter in order to close sales," she said. "This may have helped their bottom lines in the short term, but it could have long-term consequences on the overall health of the channel structure."

In other findings, 41 percent of U.S. respondents said fourth-quarter sales were below expectations, and 90 percent said fourth-quarter sales would be flat or below third-quarter sales. Also, solution providers expect prices to be "buyer friendly" or down by as much as 20 percent compared with the year-ago quarter.