INPUT DEVICES: Keyed To Growth

With an estimated sales of Rs 25 crore every month, most resellers have
grown their input devices revenue by 25% to 30% q-on-q. However, vendors are
perturbed by the flooding of cheap and low-quality products through the gray
channel and incidence of counterfeits in the market. Partners don’t wish to be
drawn into these issues and prefer to boost their sales by offering satisfactory
after-sales service.

With a healthy growth in PC business, the demand for keyboards and mice too
has gone up. MAIT has projected that roughly 27,00,000 PCs will be shipped
during 2003-04. The size of the input device market is expected to be 50% more
than this because consumers tend to change keyboards and mice more frequently
than other PC devices.

The advent of new technologies in input devices has sparked a buying spree as
well. Vendors and resellers predict that this market is slated to grow at the
current pace of at least 30% in 2004-05.

OPTICAL TECHNOLOGY

Vendors are cashing in on the expected boom in input devices by launching
new technologies and products. Optical technology has become the de facto
standard for newly launched mice. It implies that the latest devices do not have
roller balls in their bases, but use reflected light to trigger cursor moves.

UNBRANDED DEVICES STEAL A MARCH Unbranded, inexpensive devices enjoy 50% marketshare due to lower prices  Resellers get a 2% margin on selling Microsoft or Logitech, while unbranded products can net in 7%  Customers go for these low-priced mice as these are replaced almost once a year  Though MNC brands offer better after-sales support, their prices need to be decreased to increase their marketshare

Chander Shekhar, CEO, Revika Computronix, remarks that though optical mice
are priced three times higher than normal mice, there is good business in it,
especially if a partner provides good after-sales service.

In mice, The Best has come out with its latest 8D Ball mouse. The company’s
MD, Sandeep Parasrampuria adds that RF cordless technology is fast gaining
momentum and there will be a huge demand for these products in the next couple
of years. Microsoft has also introduced its high-end mice with similar features
on its track wheel.

In keyboards, The Best is promoting the Office technology, where certain keys
can be programmed to execute certain functions of the Office suite, like open
files, cut, copy, paste etc.

Advik too is testing the input devices market after launching one model in
each category. Aditya Vikram, CEO, informs, "Our keyboard is priced at Rs
300 and the mouse at Rs 80. We will soon launch newer models within six
months." Intex has 18 models of keyboards and eight types of mice. It
recently launched its black multimedia and silverline keyboards, which have been
well-accepted in the market.

THE INPUT DEVICE MARKET

Vendors and partners agree that the Indian input devices market is poised
for growth. Says Sanjiv, "India sells keyboards and mice worth Rs 25 crore
every month." He expects this growth rate to continue in the coming fiscal
and has added 10 branches to bring in more sales.

Almost all companies reported good growth rates in H1, 2003. JP Bansal,
Director, Intex, reveals "We experienced a growth of 40% in AMJ and JAS
quarters as compared to the same period last year. We expect our revenues to
increase in a similar proportion, in the coming fiscal too."

Adcom
too has grown 100% in H1 2003, as compared to H1 2002. The Best too had a good
going and expects a 15% growth, on a month-to-month basis. Semco increased its
reseller base, boosting its marketshare, which partners peg around 20%. It is
now looking at another 10% growth in the mice and keyboards segment.

Partners too are buoyant about this business as sales have seen an upward
swing. Says Anees Khalfay, Director, Radiant Technologies, "We are hoping
to grow at a rate of 20% in the coming fiscal in the input devices
segment."

FRAUGHT WITH FAKES MAIT Estimates that 12% of the peripherals are fake in the country  Logitech working with MAIT to organize workshops to educate users about identifying fakes and drawbacks of using it  Vendors lose 10 to 12% revenue because of counterfeits  Smaller vendors not concerned by fakes as their prices are almost half the rate of MNC brands

Bharat Bhushan, CEO, RR Systems, informs that business in input devices has
been good. "However, I expect the market to grow by 15% to 20% in the
coming fiscal," he adds.

But sales are dependent on several factors like warranty and good after-sales
service. "Customers look for reliability and fter-sales support. And this
is precisely why Adcom has succeeded in the market, with 11% marketshare in both
segments," says Sanjiv.

Keshav Madhav, CEO, Vidur & Co agrees that users look for reliability
while buying these products. "Since these items are changed frequently, it
is in the vendor’s best interest to offer the best service, so that the user
keeps returning to the same brand again and gain," he notes.

SAMSUNG TAKES THE LEAD

Samsung Electro Mechanics (Semco), a sister concern of Samsung Electronics,
claims that it tops in the sales in keyboards. According to Saif, Sales
In-charge, Semco, "We have a 50% and 35% marketshare in keyboard and mice
segment, respectively. We are now targeting a 15% growth for both in the coming
fiscal."

“Our only concern is the increase of fake mice in the country and we are trying our best to stop its trading” Rahul Bindal, Country Manager, Logitech

Bharat Bhushan, CEO of RR Systems agrees that Samsung has the maximum share
in the keyboard market due to its competitive pricing and good service
structure. "Customers are comfortable buying Samsung because they know that
there is no compromise on quality even if it is available at a lower cost,"
opines he.

Among leading brands, Semco has been very aggressive on the pricing front,
which has played a crucial role in helping it bag a major marketshare. Its
keyboards and mice are priced at Rs 200 and Rs 130, respectively.

Also, the company consciously focuses on providing most new features in one
product, rather than launching new models everyday. And this has worked to its
advantage as customers get what they want in the same device.

“The biggest problem in the input device market is the flooding of cheap, low-quality products through the gray channel” Mohit Anand, Manager, Home and Entertainment Division, Microsoft India

According to Bansal, Logitech has an edge on Semco in the mice segment with
25% marketshare. "Semco and Intex follow with 20% share each," he
says. Bansal feels Microsoft has not been very successful in the input devices
market because it does not have a good positioning strategy and is not
aggressive in pricing.

SCHEMES THAT FURTHER SALES

Schemes truly drive sales in this low-value segment, which is why vendors
make it a point to come out with promotions as frequently as possible.

Rahul Bindal, Country Manager, Logitech India informs that they had recently
organized an end-user promotion campaign, where they gave away cars. The company
doesn´t look at keyboards and mice as mere input devices, but as consumer
lifestyle products. "So, we take care and give due importance to users when
they launch any keyboards or mice in the market," adds Rahul.

Microsoft
also plans to launch various promotional offers in the coming fiscal to increase
its share in the keyboards and mice market, informs Mohit Anand, Manager, Home
and Entertainment Division, Microsoft India. Among its recent activities was a
channel-focused roadshow to launch the 2004 range of hardware products at eight
cities. For the channel, it held the ´Microsoft Beach Tango´ and the
´Catch-a-Match´ schemes.

Intex is presently running the ´Point Banao, Gift Le Jao´ reseller scheme,
wherein resellers from Delhi and the Northern region can take away gifts worth
Rs 500 to Rs 6,000, depending on the points accumulated by them. The Best IT
World too is offering its end-customers the ‘Mach3 Chikna’ scheme, wherein
they are giving a guaranteed gift along with lucky coupons on the purchase of
its input devices.

“While purchasing keyboards and mice, the foremost thought in customers’ mind is reliability and after-sales support” Sanjiv Bhatia, CEO, Advantage Computers

FLOOD OF CHEAP PRODUCTS

One of the major problems that established brands are facing in the input
devices market is the flooding of cheap and low-quality products through the
gray channel. Points out Mohit Anand, Manager, Home and Entertainment Division,
Microsoft India points out, "These products are not good for customers and
partners alike, as they are not designed and manufactured with user-comfort in
mind." These devices, which are not backed by warranty, fail frequently,
and partners have to replace them, which impacts their bottomline.

Logitech, on the other hand, is trying to wage a battle against the presence
of fake mice in the country. According to Rahul, "We are concerned about
this menace and are trying our best to put a stop to the sale of
counterfeits."

MAIT figures show that almost 12% of the peripherals market comprises
counterfeit products. Counterfeiting includes illegal usage of reputed brand
names, passing off factory seconds as fresh products and mis-declaring technical
specifications on the package.

Logitech is in talks with Manufacturers´ Association of Information
Technology (MAIT) to stop the usage of counterfeit products in the country. It
has been organizing numerous seminars to educate users about identifying fakes
and understanding the pitfalls in using these products.

“Customers are comfortable buying Samsung because they know that there is no compromise on quality even though it is available at a lower cost” Bharat Bhushan, CEO, RR Systems

Microsoft too is pitching efforts in this direction by educating the channel
and end-users on the perils of using pirated goods and highlighting the quality,
reliability and warranty offered by reputed brands. According to Sandeep another
issue of concern in the input device business is the entry of new players on a
day-to-day basis. "This makes the market more volatile as authenticity of
these players cannot be guaranteed," he notes.

While the overall input devices market is set to grow in the months to come,
local brands have all the more reasons to celebrate. The price disparity between
local and MNC brands, has seen the sales of the former gaining more ground. The
user mindset is that if these low-value items have to be replaced almost every
year, he might as well go for a cheaper product.

But this does not mean that MNC brands are not selling well. There is a
section of the buyer segment that wants quality, despite the cost, and it is
this section that most MNC brands are training their sights on.

ATANU KUMAR DAS with inputs from NELSON
JOHNY