“Negative Sales” and the Slowdown Shadow

MAIT often stays a bit “ahead of the times”. Its market figures are
always more optimistic than Dataquest and IDC figures. For this IT industry
association, India crossed the five million PC mark long before our December
2000 projection.

So when MAIT says “slowdown”, things must be serious. In its
half-year review in January, it showed 26% growth for PCs, versus 45% last H1.
It dropped its projection for 2000-01 from 1.9 million to 1.75 million PCs.

Now, 1.7 million was Dataquest’s projection anyway, and it will need
further revision downward: but that’s not the point. There is a slowdown. And
it’s more worrying than the industry might admit.

First, the IT downturn has beaten the economy’s. It isn’t that businesses
don’t have money to spend on infotech. But it looks like they’re pulling
back cash from wherever they can, anticipating a liquidity crunch. They’re
spending what’s absolutely necessary. The rest goes into the bank…

And the banks aren’t spending much either, especially the public sector
banks that were headed for big-time IT. They too seem to be worrying about a
cash crunch, possibly from the VRS tht could suck out funds.

Then there’s the infotech high-growth area: small businesses, and SME. They’re
going slow on IT. Why? Again, there’s no big cash crisis, but things are
tighter. Collections need more follow-up. Receivables are at several months’
billings, or more.

And the channel clincher: The home market has slowed down. Yikes. The star of
the market, invulnerable to recession. Why has the home been hit? It’s not as
if salaries have dropped. But it does look like the sentiment is spilling over.
All those executives worrying all day about liquidity, receivables, tight credit…they
don’t switch off when they go home. The sentiment stays: Don’t buy, save.

I first heard the term “negative sales” last year: sales at below
cost. Now I hear it more often. With predictions of a bloodbath, as PC majors go
“heavily negative”. But price cuts may not change buying sentiment. A
lot rests on the Budget 2001: not just duty reductions that could drop prices,
but the overall sentiment which desperately needs a boost. Even more rests on
the hardware and channel majors. They can either use this as a chance to come
and work together on this crisis, even pooling in their resources for joint
messages and events aimed at uplifting the sentiment. Or they can prepare for
the bloodbath.

pkr@cmil.com

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