CRN Research: VARs Turn Pessimistic About Third Quarter Sales

Solution providers' overall sales expectations for the third quarter plunged to their lowest level since CRN began publishing sales expectations data more than two years ago. The overall sales expectations for the third quarter came in at 60, compared to 94 in the second quarter 2006 and 80 in the year-earlier period. (The data is based on an index figure of 100 from April 2004 to compare results).

The decline in sales expectations was broad-based, encompassing all major product categories, as shown in Chart 1. Desktops, notebooks, networking software, storage, VPNs, supply chain management, application development tools and data warehousing were among the product categories seeing the steepest declines.

Solution providers' sales expectations for the third quarter dropped sharply in all three business segments, including large firms, midsize companies and small businesses. The drop was particularly sharp among large companies (with at least 1,000 employees), with sales expectations at their lowest level in more than two years. CRN, however, believes that solution providers may be significantly underestimating the sales potential in the large company market.

The list of categories where solution providers have the highest sales expectations for the third quarter showed a major turnover compared to the second quarter. Five new categories joined the list, many of them with a services-related theme: voice over IP, Web services, Web site design and development, hosting and anti-spam. These replaced desktop PCs, notebook PCs, networking hardware, firewalls and anti-spyware.

Both Dell and Hewlett-Packard saw significant declines in their PC hardware market position in the second quarter compared to the first quarter. In contrast, Lenovo saw a significant strengthening in its position in the small and midsize company markets for desktops and notebooks. The results for IBM were also positive, especially in the PC server market. Overall custom systems also showed strength in the second quarter, reversing some of the losses that took place in the first quarter in areas such as desktops and PC servers.

The delay in the release of Microsoft Vista until January 2007 has also made its presence felt in the list of the top 10 products and technologies that solution providers plan to sell or recommend to their small and midsize business clients in the third quarter. Branded desktops and notebooks dropped off the list, consistent with other CRN data showing that sales expectations for these categories dropped significantly from the second to third quarters.

MORE RESEARCH

Click on these links to get the latest spending outlook from CRN Research by technology segment:

• Hardware
• Software
• Networking
• Security
• Custom Systems

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