Over the past year, International Data Corporation Israel has conducted six shelf surveys of the local computer market. The main focus was the hardware market, including Personal Computers, computer systems, work stations, network servers, desktop printers, as well as a general analysis of Israel’s market as compared with other Middle Eastern markets.
IDC intends to survey other markets during 1997, such as software, programs, services, communication, etc., in order to round out the Israeli high-tech picture. The following survey is based on 1995 research of Israel’s market, and includes a forecast for the present and future years.
Personal Computers
Even now, the highest rate of growth in Israel’s computer market is that of personal computer sales. In 1995, the rate of growth for PCs was 24%, but this year, due to budget cuts and a general market slowdown, IDC expects the rate of growth to be lower, reaching only 10%. IDC estimates the total value of the 1996 PC market, in consumer price terms, will be $367 million.
211,000 PCs were sold in Israel in 1996, in addition to the 878,00 PCs already in use. Accordingly, IDC estimates there are 973,000 PCs in use in Israel. The boom in computer sales has passed, say IDC, as has the amazing double-digit growth rate. Growth will be smaller from here on, about 10% or even lower.
Two thirds of PCs sold in 1995 were 486 processor -based, and the remainder Pentium processor-based. With the reduction in Pentium prices, the home market began buying these PCs as well, primarily in the low speed range of 75 and 90 megahertz.
Desktop PCs represented 95% of all PC sales in Israel. The reason given by IDC is the country’s small size, as managers, generally the target market for laptop and notebook computers, travel only short distances and tend not to take their portable computers along for the ride.
Israel’s PC market continues to be divided evenly between name brands such as IBM, Packard Bell, Digital, Compaq etc., and locally assembled PCs made from imported components. Among the 18 foreign PC manufacturers represented in Israel, IBM continues to lead the pack, followed by Packard Bell and Digital. Among local manufacturers, EIM has the largest market share.
The home market is Israel’s largest consumer of personal computers. Over one-third of 1995 PC market revenues, some $125 million, stemmed from this sector. $53 million in revenues stemmed from large and medium-sized businesses and the government sector. The remainder of market share was divided among the education sector at $29 million and small businesses at $16 million.
Workstations and Multi-user Platforms
The category with the largest market share in revenue terms belongs to computers systems priced between $10-25,000, with a 1995 volume of sales approaching $54 million, or 20% of the market. 35% of workstations and computer systems sold in 1995 fall under this category. These systems are primarily UNIX-based, manufactured by Hewlett Packard, Sun, Silicon Graphics and Digital.
The largest number of computers (44%) were sold in the low-priced category, computers and workstations priced $10,000. The most popular model is IBM’s RS6000, followed by Sun, HP and Digital workstations.
The third largest category in terms of revenues is that of mainframe computers, generally priced at over $1 million. IBM continues to have a definite hold over this market.
UNIX is Israel’s most popular operating system for multi-user platforms, with 86% of computers operating in this environment. After UNIX, in terms of new installations, Digital’s Open VMS system is second most popular, followed by Microsoft Windows NT and IBM OS 400.
Network servers
IDC estimates network server sales grew 19% this year, after a dizzying 43% rate of growth in 1995. IDC estimates 9,800 server computers were sold in Israel in 1996, bringing the total number of network servers to over 30,000. The rate of growth is expected to continue at an annual 18%. The 1996 market is estimated at $44 million, and IDC expects revenues to grow by 20%, to $53 million in 1997.
Two thirds of network servers sold in Israel were desktop PCs, defined by users as servers, either dedicated or as part of other functions. Of those computers, one half were sold by local manufacturers and the remainder were brand names. Only one-third of severs sold were dedicated servers, a segment representing $19 million in revenues or one-half the overall market, led by IBM and Compaq, who sold an equal number of servers.
The dominant operating system was Novell’s Netware, with over three-quarters of all 1995 installations, followed by Windows NT and IBM OS2.
Over half of non-dedicated network servers, and 70% of dedicated servers, were purchased by the medium-sized business sector. The education sector was responsible for one-third of non-dedicated server sales and one-fourth of dedicated server sales.
Desktop Printers
IDC estimates there are 416,000 desktop printers in use in Israel today. The printer market is valued at over $108 million per year and growth projections for this year are 19% and 15% for sales and revenues respectively. Hewlett Packard leads the printer market, followed by Olivetti, Canon, and Epson.
Over half of desktop printers in Israel are laser and ink jet printers, of which 60% are ink jet, and the rest laser printers. All other printers are dot-matrix. In 1995, due to price discounts, laser and ink jet printer sales accounted for 80% of the market or $84 million. The remainder of revenues, some $11 million, stemmed from dot-matrix printer sales.
Conclusions
Israel’s computer market is characterized by fierce competition and brand names are gaining in importance. In 1995-6, almost all leading computer and software companies, established official representation in Israel.
In 1995, the PC market was characterized by a gradual but unyielding move to brand names. This came at the expense of generic computers, whose market share increased to 24%; at that point the market provided for all. However, IDC foresees a weakening of sales in 1996-7, on expectations of an economic slowdown. This trend will influence sales of non-brand names and overall profitability for the sector. IDC sees further consolidations between companies, and the disappearance of sub-contractors or middleman distributors, similar to the situation in late 1994 and early 1995.
The multi-platform and workstation market is highly sensitive to economic expectations. To date, IDC has not noted an outstanding slowdown in government procurement, but if this does take place, if will affect the midrange and mainframe markets. The workstation market, however, enjoys continued investment on the part of the research and development sector, primarily from high-tech organizations. US firms now operating in Israel are generally not affected by local developments, and work according to long-range plans. Military procurement is also not expected to be affected.
The real winner of the desktop printer market is the ink jet printer, the true heir to the dot matrix printers position in the home market. In the business sector, discounted laser printers lead in terms of sales, due to good consumer prices. Competition in this market is not among brand names, but between various marketers of the same brand name.