Sri Lankan PC Market Restrained by Political Changes and Elevated Violence, Springboard Research Finds

PC/Server Market Misses 2005 Growth Projections, and 2006 Forecast Lowered

Singapore - April 26, 2006

One of Asia’s fastest growing PC markets over the past several years, Sri Lanka’s market was held back in 2005 by uncertainties caused by the lead up to presidential elections in November 2005 and the violence that followed. PC shipments increased 13.7% annually in 2005 to reach 134,000 units, which was considerably lower than Springboard’s 17.7% forecast.
Key market accelerators such as low PC penetration, strong economic growth and growing IT awareness remain in place; however, escalating violence between the government and LTTE is a major concern for the market looking forward. The government is the largest IT buyer in Sri Lanka and efforts directed toward conflict with the LTTE divert focus and investment from the IT sector. In addition, an escalation of tension will damage the vital tourism sector and foreign direct investment.
“Sri Lanka has overcome considerable challenges in the past, enabling the IT sector to develop quickly; however, unless improved the latest tensions will undoubtedly damage IT market growth in the country,” commented Dane Anderson, Vice President of Springboard Research. “We remain bullish on the long term prospects of the Sri Lankan IT market, but our short and mid term outlook has been damaged by the current situation.”
The laptop market led growth among product sectors in 2005 with 17.4% expansion over the previous year. Falling notebook prices and growing mobility requirements fuelled the notebook segment. The desktop segment - which represents 90% of total PC shipments - expanded 13.5% during the same period, while X86 server shipments increased 11.1%.
Although government IT spending was damaged during the last quarter of 2005, the segment (excluding education) represented over 21% of 2005 shipments, followed in terms of scale marginally by the home segment. In the enterprise market, the major PC/Server deals during the year came from the Banking, Telecom, Textile and Education sectors, which is expected to continue in the coming years.
Like other emerging markets, the PC market in Sri Lanka is heavily dominated by small local vendors and non-branded PC assemblers, who have over 70% shipment market share. Among branded vendors, Lenovo/IBM led the market with a 9.1% share of shipments in 2005, followed by HP and Dell. The dominance of assemblers is clearest in the desktop market, but in the less commoditized laptop and X86 server markets international brands fare far better.
As a result of the current tensions, Springboard’s 2006 shipment forecast was decreased to 19.2% from 23.5%. However, the broader environment has deteriorated since the forecast update and further decreases are likely if the situation does not improve. Although broader market drivers are expected to buoy the market and enable healthy growth compared to developed countries, the market will be restrained by the current violence and prevented from hitting the explosive growth rates that would have otherwise been possible.
About the Asia Emerging Countries Tracker

The Asia Emerging Countries Tracker is a Springboard Research service that tracks PC/Server market developments in Bangladesh, Brunei, Cambodia, Sri Lanka and Pakistan on a quarterly basis. The methodology employed for this service leverages interviews with IT resellers, vendors, component suppliers and end-users at the local and regional level.

About Springboard Research
Springboard Research is a leading provider of innovative IT market research products and services. We leverage a next generation research model that harnesses new opportunities to streamline operations, automate research processes, and deliver insights in more interactive formats. Springboard’s cutting-edge research model leverages offshore research resources, the Internet, and an increased use of technology as engines of innovation to deliver unique research value. Our growing client base consists of leading IT firms in the hardware, software, networking, and services sectors.
A division of Knowledge Platform Inc., Springboard Research is headquartered in Singapore with offices across the Asia/Pacific region.

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Chris Perrine
Vice President - Business Development
Springboard Research
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Dane Anderson
Vice President - Research
Springboard Research
65 6236-7682
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