The Rise & Rise

The buoyancy in the notebook market continued in FY 08 with a healthy growth
of 83% in unit terms. In value terms, the growth was 59%. Form factor, design,
price, and performance are the four key elements that topped the vendors agenda
over the year. A look at the processor make-up shows the market being composed
of both Intel and AMD based offerings, with an inclination toward Intel in
India. AMDs Turion 64 offering is yet to see large-scale adoption in India.

Key Players

In line with the trend, HP remains the undisputed king in the notebook
space, making up the lions share of around 35% in unit terms. At number two is
Lenovo, which managed a growth of 61% in its unit shipments compared to 69% the
year before. In terms of growth, Acer had one of the best years in the industry
registering 230% growth in unit shipments compared to its previous years
performance. This took Acer to the third spot, overtaking Toshiba and Dell. Dell
retained its fourth place in the top five club, but Toshiba slipped out making
way for Acer. HCL became the new number five. In terms of market domination,
these top five players controlled the market and made up for 79% of the total
notebook shipments during FY 08.

HPs continued dominance in this space can be attributed to its reach and
breadth of products. It penetrated the market with entry level to top-end ultra
portables. Its products offerings are well defined across consumer and
commercial segments. HPs Pavilion and the Compaq Presario ranges are for the
consumer segments while on the commercial side, the company adopted a new
nomenclature in business notebooks. In line with that HP launched new notebooks
in four categoriesstandard (s), business (b), professional (p) and workstation
(w). the intention behind this new nomenclature is to better connect with
customers. An aggressive go-to-market strategy complimented by focused products
did the trick for HP over the year and its numbers are the proof. HP also
introduced a new range of commercial notebooks over the year.

For celebrity jazz, King Khan was brought in to endorse HPs products. In
terms of design too, HP adopted a strategy of innovation with elegance and
unveiled a new Compaq brand last year. The new logo is a C and Q combined,
resembling a thought bubble, which HP integrated in its publicity campaigns for
more brand recall.

For Lenovo, revenues from notebooks well surpassed that from desktops. FY 08
saw close to 60% of the companys total revenues coming from notebooks. Lenovo,
despite being a very young brand in India, has considerably expanded the
ThinkPad range and launched its own branded consumer notebooks. A significant
launch on the commercial side was the ThinkPad X300, one of the thinnest and
feature-rich business notebook. At the end of the fiscal Lenovo launched a new
consumer PC brand called Idea. In line with that it launched notebooks on the
Ideapaq range. These are consumer-focused notebooks and hence took into
consideration features a home customer looks atDolby sound, dedicated gaming
controls, etc. The government vertical was good for Lenovo last fiscal, with
large orders from Tamil Nadus ELCOT.

	How they Stacked Up Company Revenue (in Rs crore) HP 3,500 Lenovo 1,708 Dell  990 Acer 819 HCLI 690 Others 1,823 Total 9,530
Source: DQ Estimates
Laptops drove the margins for HP, with lifestyle computing forming the backbone on the consumer front. Dell has been a success story with its XPS and Inspiron range of consumer notebooks and Latitude and Vestro range of commercial models. HCLs entry into the Top 5 club owed much to the successful launch of the MiLeap series

Lenovo involved channels in both sales modelsrelationship and transaction.
The transaction model caters to mid-markets while the relationship model is more
tuned to large enterprise orders.

Acer spiked up its dull performance in FY 07 to find itself at the third
spot in last years Top five club. A triple digit growth and 247,787 notebooks
shippedAcer attributes this impressive growth to a global design overhaul on
the Gem Stone design coupled with its aggressive strategy in attacking the
consumer space, where its core strength in notebooks lies. Hrithik Roshan,
brought in as the brand ambassador, worked remarkably well for the company in
establishing the brand in India.

The notebook market continued to flourish, though prices did not drop as expected

Its been a great year for Dell too. A key highlight over the year being its
manufacturing entity that became functional last year. It has a peak capacity of
1 mn units across three shifts. Dells factory in Sriperumbudur near Chennai
manufactures all its notebooksLatitude, Inspiron, and XPS ranges. A few years
back Dell notebooks in India were found in only large enterprise, but in the
last couple of years that scenario has considerably changed. Dells consumer
slice is increasing and it is able to make a dent into that space with its
Inspiron range, which hit the sub Rs 50k market over the last year. Acer also
offered aggressively priced AMD-based laptops. In April this year, Dell made its
foray into low cost notebooks made for Indian and Chinese markets; called Dell
500 and priced at Rs 25,000. Dell is bullish about the uptake of this low cost
notebook by verticals like education and home.

While HP remained the undisputed king in notebooks, Lenovo and Acer consolidated themselves. Toshiba made an exit from the top five club; ironically, it was replaced by HCL Infosystems, which discontinued Toshiba distribution during the year

HCL Infosystems effectively met the onslaught of the MNCs with a 155% growth
in its notebook unit shipments. The Leaptops range, which targets both
commercial and consumer segments, saw HCL aggressively targeting the consumer
space through a dedicated micro site for Leaptops. HCL put up tough competition
to Acer in terms of pricing and product mix for its consumer notebooks which
started from a price of Rs 35,000. HCL also distributes Toshiba notebooks in
India. Toshiba exited the Top 5 club last year, the reason for which can be
attributed to the volume growth that companies like Acer had while Toshiba is
strong on the commercial and premium notebook segments. So to get back in the
pink of things, Toshiba decided to adopt a multiple distribution model starting
this fiscal for notebooks.

Key Trends

The bigger market in the notebooks space is for the sub Rs 35k for consumers
and the sub Rs 50k for the commercial segment. Anything priced above goes into
the premium category of notebooks. In the high-end notebook segments players
like HP, Lenovo and Dell continued to dominate, so this space will be driven by
the traditional buyers and repeat businesses from large enterprises.

For the low cost sub Rs 35k notebooks, the processor strategy is mostly
Centrino-based, while Celeron is on the way out. So from the power-performance
perspective, there was a clear blurring of lines between low- and mid-end
product offerings as Intels Core 2 Duo became a kind of default notebook
processor standard. What differentiated the premium segments were aspects like
weight of the notebook, form factor, and battery life. What was clear from
vendor performances over the year was that to increase volumes one needs to have
an eye on design elements and other specific features. HP, Acer, Lenovo and Dell
all made design changes in terms of look and feel and form factor, and hence had
better market connect.

Its been a rather sustaining act for all playersZenith, LG, Wiproexpect
Sony, which broke the price barrier with its VAIO series starting at Rs 50,000
targeting the young professionals. For players like LG, which is more focused on
the premium segment, pricing would be an issue as that market is being
challenged by products focused at the mid-market. Companies like LG believe that
innovative products like its R 200 notebooks will keep the premium segment
alive. For Zenith, it will be a challenging task matching the product breadth of
players like Acer and HCL. For players like Zenith, competitive pricing has been
the USP but with players like Dell and Acer breaching price barriers, the
competition is getting very intense. So players like Zenith have to come out
with more innovative and functionally rich products at lower prices, which will
make up for more volumes.

Outlook

With the reality of fully functional notebooks at sub Rs 30k, volumes will
continue to soar in the coming year. This trend will also enable more first time
PC buyers to go in for a notebook rather than a desktop. For low-end notebooks,
the biggest segment is the student community that is composed of individual
buyers and institutional buying. For instance, Tamil Nadus ELCOT has launched
special promotional drives for students offering laptops at subsidized rates.
Vendors like Dell, Acer, and Lenovo are looking at getting a major slice of the
government and educational verticals in the ongoing year.

Shrikanth G

shrikanthg@cybermedia.co.in