The IT supply chain in North America showed slower growth in the fourth quarter, at 5.2 percent compared with 7.1 percent the previous year, as customers apparently put off purchases until they could buy systems with Microsoft Vista.
That was the assessment of research firm Raymond James & Associates in its "IT Supply Chain Demand Survey" for the final quarter of 2006, which placed worldwide IT supply chain growth for the quarter at 7.5 percent compared with the same quarter the previous year, and 14.1 percent compared with the third quarter of 2006.
"Our findings this quarter suggest that while IT demand remains reasonably solid, there is a pause in systems purchases in anticipation of Vista," the St. Petersburg, Fla.-based firm said in its report. "That said, Vista is expected to progress at a modest pace as IT capital spending is now driven more by profits than product cycles."
The report noted that market research company IDC has said that Vista's hardware requirements together with strong corporate profits in 2007 should help drive IT spending growth in the 6 percent to 7 percent range in 2007.
Raymond James expects sales for the largest resellers—those that focus on corporate, government and SMBs (small and midsize businesses)—to rise by 2.9 percent in the fourth quarter compared with the same quarter a year ago and by 1.6 percent compared with the third quarter.
"Within the reseller space, SMB growth appears to have moderated over the past year, from a 6 percent pace to an estimated 1.5 year over year pace this quarter," the report said.
The report noted that distributors' prospects, and by extension those of their VAR customers, have remained steady over the past two quarters in contrast to a slowdown in direct marketer shipments during the same period. While the Raymond James report could not pinpoint a reason for this shift, the company speculated that it could be related to a higher mix of enterprise products and services offered by VARs.
Large corporate account spending slid by about 1.7 percent compared with the same quarter a year ago.
On a product basis, notebooks and networking/communications equipment sales were stronger than average while printers and desktop sales were below average. However, system sales momentum declined across the board, likely in anticipation of Vista, the report said. Disk drive sales improved during the quarter.
In the desktop space, Hewlett-Packard's share of shipments through U.S. distribution channels improved dramatically, the report said, while Lenovo and Apple's shares both declined.
Notebook sales stayed strong but faded as the quarter progressed. HP, Panasonic and Apple gained share through the channel while Lenovo and Acer "appear to have ceded significant channel share this quarter."
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The report noted that server sales were surprisingly weak during the quarter. In spite of that IBM won a sharp increase in market share through the channel during the quarter while HP/Compaq lost share.
Printers remained a weak product line in the quarter, primarily due to ASP (average selling price) declines and a small shift to direct sales, the Raymond James report noted. Lexmark showed some added strength during the quarter at the expense of others, including HP, according to the report.
Networking/communications products showed the strongest growth again during the fourth quarter, although Cisco appears to have cooled off after gaining substantial share in the channel during the first three quarters of the year, the report said.
On a regional basis, the slower growth for the Americas in the fourth quarter compared with a year-over-year growth rate of shipments through distribution of 7.1 percent in the third quarter. Notebook sales growth showed the most dramatic change as demand in that category moderated, according to the Raymond James report.
European shipments through distribution are expected to increase by 7.7 percent for the fourth quarter compared with the same period last year. However, the Raymond James report said much of that increase is cosmetic and coming from currency factors. On a constant currency basis, the firm said it estimates that European shipments are nearly flat versus last year.
"That said, there are rumblings of underlying improvements in European IT spending," the report said.
Shipments through Asian distribution channels in the fourth quarter grew at the fastest pace, rising by 13.7 percent compared with last year's fourth quarter and by 5.6 percent compared with the third quarter, the company noted.
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