Zenith bucks for a top-five slot

Hitherto a marginal player in the notebook segment, Zenith is gunning for a top-five slot, says Akhtar Pasha

RAJ SARAF is certain that Zenith’s aggressive pricing strategy for notebooks will take away some market share from the competition

Zenith Computers has been an also-ran in the notebook market with less than one percent share. As per IDC India, Zenith sold 677 units in 2003. Compare that with the total notebook market of 85,000 units that year and it’s plain to see that some reworking of the company’s strategy was in order. Now it is taking some bold steps to take on MNC brands. With a recent announcement, Zenith launched seven new notebooks priced in a range from Rs 32,000 for SalesPro II, a Celeron-based notebook, to Rs 70,000 for the company’s latest Centrino Mobile processor-based Presidio. With its beefed-up range, Zenith wants to sell 15,000 units in fiscal 2004-05.

While that figure isn’t free from hype, the fact remains that Zenith has started moving some decent numbers. Starting from July 2004, the company has sold 600 units to banks and FMCG companies. SBI bought 75 units. Antonio D’Souza, area general manager-IT Services, SBI LHO in Mumbai, says, “Zenith got the tender because theirs was the lowest [bid]. Being a public sector bank we go for the lowest bidder.” But D’Souza points out an interesting fact which Zenith wants to capitalise on. He says, “We bought the 75 units to arm our sales force for gathering information on the field.” He adds that some middle-management staff will use the wireless capabilities of these notebooks. Marico Industries that bought 15 units of Zenith’s Centrino 1.5 GHz model with 256 MB RAM and 40 GB hard drives, which points out another interesting trend. Says Marico’s infrastructure manager, Srinivas Rao, “Our top management has been using Toshiba notebooks for quite some time. We have disposed off those machines to middle-management executives and have given the latest Zenith Centrino Mobile notebooks to our white collar executives.” Rao believes that Zenith offers a good value proposition with wireless capabilities.

According to SANJIT SINHA, notebooks priced below Rs 50,000 contributed a mere 175 units of the total of 35,005 units sold in Q1 2004, which is not even one percent of the total notebook sales in that quarter

Other recent wins include the Indian Business Academy (40 units of Director), Marico (Director), Fortis Security (Presidency), Raymond (SalesPro II). Vision Comptech, IVRCL, Parag Parikh Financial, Ashok Leyland, Sandur Manganese & Iron Ores, Centurion Bank and HDFC. Looking at the current run rate, it is safe to say that Zenith should be able to sell 2,000 to 3,000 units in the next few quarters, which should give it a place in the top five. The strategy of launching seven notebooks to match the tastes of different users is a good one as Zenith had only two models in the past—Director and another 15-inch notebook that it discontinued and replaced with the Strategist. Industry pundits say that it is good to have notebooks at every price point with the objective of providing a wide spectrum of choice. Says Raj Saraf, chairman and managing director, Zenith Computers, “Our aggressive pricing strategy for notebooks will take away some market share from the competition.”

These are some of the market trends upon which Zenith will base its notebook campaign. Saraf explains, “The entry-level notebook, SalesPro II, is priced at Rs 32,000 (without OS and sales tax), and it has mass appeal for sales force teams in pharmaceuticals, textiles and banking. There are also large groups of individuals such as lawyers, architects and contractors who do not want to own two machines. Educational institutes are another target market for us. Our notebooks such as Executive, Director and Strategist are expected to drive sales in the ratio of 40:40:20 to achieve our target of 15,000 units.” The Marico and Fortis Security deployments show that enterprises are starting to think of equipping their sales force teams with notebooks. Says Saraf, “Our aggressive target is backed by 450 support and service centres in metro and non-metro cities.”

Vinod Nair, analyst, computing systems, Gartner India says, “The price difference between notebooks and desktops has narrowed, which has catalysed notebook sales especially in the SME segment.” Zenith’s entry into the sub-Rs 35,000 notebook segment will create ripples in the notebook market leading to the question...

...Will MNC vendors follow suit?

The answer appears to be a resounding ‘No.’ HP and Acer, the two MNC vendors who brought entry-level notebook prices to sub-Rs 38,000, are now moving away from this price point saying that it is not a volume market and does not give true value. S Rajendran, general manager, sales & marketing, Consumer Product Group, Acer India says, “We are no longer in the below-40,000 notebook market. We are exiting from it because of multiple reasons.”

According to him, the Celeron 2.6 GHz processor which is used in entry-level notebooks uses a desktop architecture which increase the temperature of the processor and reduces battery life from two and half hours to one and half. This factor is taken care of by Intel’s new Celeron Mobile 1.4 GHz processor that also sports a better L2 cache. If a customer shells out a bit more he gets a 40 GB hard disk with 256 MB RAM and a 15-inch TFT screen which is becoming an industry standard. All these factors are pushing the base price point upwards. Acer’s entry-level notebook, the TravelMate 292EFXC, which is built around Intel’s new Celeron M Processor 320 (1.3 GHz, 512 KB L2 Cache, 400 MHz FSB), supports Bluetooth and wireless LAN, and comes with a 15-inch TFT screen. “The Mobile Celeron M 320 processor performs 35 percent more efficiently than the Celeron 2.8 GHz processor,” says Rajendran. Acer has priced its TravelMate 292EFXC notebook at Rs 44,999. “We expect this new generation notebook to be a hit with SME, home buyers and students as these segments are slated for robust growth.”

HP has also announced that they are not in the price-game anymore, and that they will not introduce any notebooks at sub-Rs 40,000 price points. Rajiv Grover, country manager, Consumer Portables, HP India says, “Their (Zenith) entry-level notebook is not as per the industry standard. Our strategy is not to offer a ‘n-1’ configuration to our customers and hence we are launching the Compaq Presario 2202 with a Celeron Mobile 1.4 GHz processor, a 30 GB hard disk, 256 MB RAM and 15-inch TFT at Rs 39,999 that offers true mobility and wireless.” He adds, “Zenith’s offering at sub-Rs 35,000 is not a strategically competitive offering.” Many industry followers say that Zenith can sustain its SalesPro II under Rs 32,000 as long as stocks of the Centrino 2.4 GHz last. The price is bound to increase when Zenith introduces Celeron Mobile processor-based notebooks.

Sanjeev Menon, brand manager, Mobile Computing, IBM India concurs. “IBM believes in offering complete notebooks that are lightweight, and offer true mobility and scalability. Keeping this in mind we have introduced R40, a Celeron Mobile processor-based notebook with an optical DVD drive and preloaded Windows XP Home Edition at a price of Rs 49,990.”

Sub-50,000 is the sweet spot

Sanjit Sinha, manager, Hardware Research, IDC India says, “Notebooks have been available at a price point of below Rs 35,000 from ACi and Kobian, and sub-Rs 40,000 from other MNCs, but it is not the volume market. Notebooks priced below Rs 50,000 contributed a mere 175 units of the total of 35,005 units sold in Q1 2004—that’s not even one percent of the total notebook sales in that quarter. But notebooks below Rs 50,000 are making their presence felt in the marketplace as they help customers take a firm decision in the lower notebook market.” Analysts and notebook vendors agree on one fact—that entry-level notebooks at sub-Rs 50,000 price points (including OS and sales tax) are expected to account for 15 to 20 percent of overall notebook sales in 2004-05. Currently, notebooks priced at sub-Rs 70,000 account for the bulk (72.7 percent in Q1 2004) of sales. Looking at the growth during the first half of the year, IDC revised its estimates for notebook sales in 2004 from 1,16,000 units to 1,88,000 units.

Zenith’s aggressive product offering at various price-points combined with the success of its products in enterprise sales should ensure that it gains market share to emerge as one of the top-five notebook vendors.

akhtar@expresscomputeronline.com