3rd Largest PC Market
With reports of the PC market underperforming due to over-saturation and intense competition, many firms are considering looking elsewhere to boost revenues and profits. And that place is Brazil, now considered as the 3rd Largest PC Market in the world, following the US (#1) and China (#2). Investors and financial analysts are concerned about the slowing market for PCs, putting some blame on Apple’s iPad and other factors. However, in July, Intel (NAS: INTC) released their earnings report with better-than-expected results and outlook.
CEO Paul Otellini describes that Intel has this “channel revenue” where their channel sales grew by 17%, that helped the company’s PC division grow by 11% during the quarter because demand for PCs remain healthy in developing countries such as Brazil. Latin America as a whole has seen a 12% growth in the PC market. The way channel revenue works is through indirect sales channels to smaller companies that make PCs with lesser-known brands geared toward specific markets.
The rise of the PC market in Brazil can give credit to Positivo Informática (BM&F Bovespa: POSI3), a homegrown brand that nobody has heard of outside of Latin America. But in department stores where the Brazilian middle class do their shopping, Positivo has the largest share of the retail market (29.9% as of 2009), and sells more computers (16.1% of total PC sales) than the next three players combined.
With a growing middle class, there are a lot of families looking to buy their first computer. To gain an understanding of the PC market, unlike the United States, where a family may have multiple desktops/laptops, one for Dad, Mom, Junior, and little Mary, the PC is shared by the entire Brazilian household, rather than it being a personal device.
Positivo is 10th largest computer manufacturer in the world. But why hasn’t other manufacturers such as Dell and HP been able to imitate the same success as the largest manufacturer in Latin America? A factor to consider stems from the Brazilian government enacting policies creating a favorable environment for Brazilian companies. Positivo enjoys a tax structure that only requires them to pay 2.75% while foreign PC manufacturers pay an average of 43% in taxes. This is a significant competitive advantage and one where Positivo expects the Brazilian government maintaining in the future.
The cheapest of Positivo’s desktops are easily affordable through financing of 50 Reals, or $30 Dollars a month. To illustrate who are buying up PCs, construction workers and those who clean houses can buy a computer for their family. As you can see, the bulk of the PC market remains with the growing middle class.
Updated: Aug. 9, 2011