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Stormy Weather

Certainly the low Australian dollar has not cut importers much slack when it comes to discounting products in order to win business, as the margins are already under pressure from the exchange rate. But competition remains fierce as suppliers fight to cling to market share. Some companies are willing to pay dearly to win new business.

This is particularly evident in the PC sector, which has recently undergone its first-ever quarterly slump. After 79 straight quarters of growth, IDC Australia, reported that PC demand fell in the second quarter of 2001.

Logan Ringwald, PC analyst for IDC Australia, says that although the first halves of both 2000 and 2001 were soft, demand is now coming from corporate users rather than the consumers who kept PC sales afloat last year. Winning big corporate accounts is key to improving market share, and Ringwald says that, even with a low Australian dollar, some PC vendors are prepared to pay to win the business."Dell has committed to a price war. A large enough organisation can command reasonable discounts as the vendors play each other off," he says.

In the less mature server market there is a greater attempt to stabilise pricing, according to IDC analyst Tom Minarik, particularly when vendors sell through distributors."I've seen a little discounting, but it's not necessarily a trend," he says. But demand for servers is down as enterprises delay upgrading equipment in light of their more cautious investment mood."They are still purchasing but only for business-critical applications," says Minarik. The numbers support that view.

In 1999 the Australian server market was worth $US887 million, which was a healthy 16.6 per cent up on the previous year. By 2000 that had dropped back 9 per cent to $US808 million. Things are looking worse this year. For the first six months of the year server sales reached $US325 million, a whopping 13.6 per cent down on the comparable period a year earlier. But again the downturn is not across all sectors. Minarik notes that although telecommunications companies and manufacturing are reining in spending, there is some increase in investment by education and government.

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