RIYADH, 21 August - The Kingdom's computer market has collapsed as sales of personal computers, laptops, diskettes and network accessories and other spare parts declined by 80 percent during the past six months.
Salah Al-Shuhail, director of computer section at Arasoft Company, one of the largest computer firms in the Gulf, said fall in demand was the main reason for the market collapse as many companies and individuals had slashed purchases.
Fresh arrival of faster computers forced many local companies to sell off their old stocks at very low prices, incurring losses.
Intel company is planning to launch its 2.6 giga hertz processor three months before the scheduled date. It is also intending to market its 3 giga hertz, the fastest processor, by November. The 3 giga processor was scheduled to be launched by the middle of next year.
"International companies used to reduce prices of old stocks by 20 percent when they launch new ones. But now they reduce prices of old computers by more than 50 percent.
"They cut the price of 2.4 giga processor from $620 to $247 within a matter of one month. This has put big pressure on distributors to clear old stocks at a time when there is a big fall in demand," Shuhail told Arab News.
The discounted sales have also dashed market confidence of consumers who thought that computer prices in the Kingdom did not match international market rates. Prices of some processors had fallen by SR1,400.
According to Shuhail, the Sept. 11 events had not much impact on the market. However, the events raised the value of insurance by 45 percent and increased transport charges.
"There was remarkable demand in January and this gave companies some sort of optimism, but the market started declining from February, without achieving any recovery so far," he pointed out.
Shuhail disclosed that the market was on the verge of a price war as prices would decline to reach cost levels by September. Intel has already instructed distributors to sell off their stocks ahead of announcing new discounted prices by the middle of next month.
This is in preparation to launch a new generation of processors coinciding with the opening of schools and beginning of a new academic year. Private and public sector activities will also increase by that time.
Khaled Bakarman, director of Al-Massiya Computers, told Arab News that many big computer shops and well-known companies had declared bankruptcy. A number of computer shops in Olaya have been closed, he added.
He attributed the closure of shops to decline in sales and fall in prices and low profits (from SR200 to SR35) per unit. Some companies are operating just to meet overheads.
He said many companies had canceled big orders for computers abruptly in March even after they were given the option to pay in installments.
"We have delayed to make a big order for computer parts to have a clear idea of market demand for computer and its components in the coming months," he said.
Bakarman expected that the market would recover in the last quarter of this year as major international and regional companies have to take effective steps to cut their losses.
Mohammed Noor Karamullah, commercial manager of Al-Faisaliyah Company, attributed the fall in profits to increase in the number of distributors, who focus on reducing prices rather than providing innovative services.
He said his company had not recorded any fall in sales but it witnessed seasonal fluctuations in prices. "Our sales are going up continuously by 13 to 15 percent, especially in the personal computers and home systems sectors," he said.
Karamullah said his company had sold 1,800 units within 45 days during the World Cup. The company has merged its maintenance centers to cut cost.
Saudi Arabia accounts for 40 percent of information technology market in the Gulf with total sales amounting to more than $1.5 billion.
A 20 percent annual increase in computer sales is expected in the Kingdom as a large number of Saudi educational institutions have started installing computer systems.
