Channel Execs See PC Refresh Opportunity In 2010
The mood at this year's Raymond James show was very upbeat, in sharp contrast to last year's show when the company was only a couple of months into the economic downturn. In particular, distribution and solution provider speakers here are looking forward to a PC refresh cycle that will have to happen because the current install base of desktops and notebooks is reaching the point where reliability and performance will be negatively impacted.
Tony Ibarguen, interim CEO at Insight Enterrpises, a Tempe, Ariz.-based solution provider, said that the sheer age of existing hardware, as well as the release of Microsoft's Windows 7 operating system should drive a PC refresh in the second half of the year. But Insight is pushing forward a plan to drive more services revenue in the first half of the year as corporations look for help designing and planning that rollout.
"We see the refresh in the second half. In a perfect world we'd like to see the design revenue around that earlier in the year," Ibarguen said. "With the ability to do design to deployment to removal, we're seeing rumblings that there's a big cycle going to kick off in the second half."
Al Montserrat, senior vice president of worldwide sales and services at Citrix, said Windows 7 will be a key driver for IT upgrades -- quickly.
"Most people actually want to get to Windows 7. We never finished completely moving to Vista -- I know I was running XP -- and now we have everybody on Windows 7," Montserrat said. "I believe more demand and a quicker drive to get to Windows 7 will make the refresh happen faster."
Bill Robbins, Symantec's executive vice president of worldwide sales, said a PC refresh in the commercial sector is more likely after the first service pack for Windows 7 is released. "On the consumer side, the PC refresh will happen as people go out and upgrade to the no OS," he added.
Tech Data CEO Bob Dutkowsky also expects a second-half PC upgrade in 2010, stressing that it will be a slow, prolonged opportunity rather than a big rush up front.
"CFOs are sitting on dollars as long as they can. They're doling them out only as necessary. It's an evolutionary refresh as opposed to a revolutionary refresh. It's smaller and slower, over time, not a big bang as in the past," Dutkowsky said. "The [PC] fleet is aging rapidly. As it ages, at the far out end of the curve, reliability falls way off in a PC device. The heat and the mechanics of disks start to fail at three, three and a half years and the [existing] fleet is beyond that."
Jeff Howells, executive vice president and CFO at Tech Data, added that an impending PC refresh will offer more revenue and margin in the past because it will include more notebooks instead of desktops and also include industry-standard servers.
"There will be a higher [average selling price], more gross profit. It's a catalyst for higher growth. Our mix of 25 percent of the business that is systems will be improved," Howells said.
Greg Davis, vice president and general manager of the global channel group at Dell, told the Wall Street crowd that his company plans to utilize the channel to help fulfill that PC upgrade cycle.
"We clearly see the advantages to utilizing distribution. From a channel standpoint, we had $10 billion globally [in sales], or 26 percent of our Q3 commercial revenue in the third quarter. That number was 19 percent a year ago," Davis said. "The year-end [uptick] is not just an IT budget flush. You combine an aging install base, Windows 7 and a stable economy and we see improvement that began in October and continued into November."
John Gantz, IDC's senior vice president and chief research officer, predicted that 300 million PCs will ship in 2010, and 40 million of them will be netbooks. He added that notebooks will not be negatively impacted by netbooks, predicting that netbook average selling prices will go up as we see more fully featured netbooks.
"PCs will be OK. Next year we'll be back on double digit unit growth for PCs," said Gantz.