Executive Summary

INTRODUCTION

This report is concerned with the UK markets of computer hardware (including personal computers —PCs — and peripherals), telecommunications and data communications hardware, office furniture, photocopiers (copiers) and other office equipment (including mailroom equipment, presentation products, binders and laminators, shredders, calculators, dictation machines and typewriters and word processors).

MARKET SIZE

The total office equipment market reached £19.18bn in 1999, and has grown by a total of 41% between 1995 and 1999.

Sales of computer equipment accounted for 58% of the 1999 market. It is by far the largest sector, although its dominance has been eroded over several years because of falling prices. The telecommunications and data communications equipment sector has increased its share of the market, from 22% in 1995 to 29% in 1999.

MARKET SECTORS

In terms of manufacturers' selling prices (msp), the computer equipment market reached £11.2bn in 1999. It showed a total growth of 32.4% between 1995 and 1999, despite the fact that prices fell by 42.2%.

There was strong growth in PCs and in computer peripherals between 1995 and 1999, in both volume and value terms. The market for servers also grew strongly. Enterprise servers (the largest type of servers) grew in value, due partly to demands for powerful web servers. This was a reversal of a downward trend which had been followed for several years. Falling PC prices helped both the consumer and the professional markets.

Other factors that encouraged the growth in the market include the growing popularity of Internet use and the availability of free Internet software, plus the year 2000 effect causing the need for some old PCs to be replaced. The expected boom in `thin clients' has not taken place so far, partly because of the availability of ordinary PCs at low prices. The workstations sector continued its gradual decline. Inkjet printers continue to dominate the PC printer sector, with laser and light-emitting diode (LED) technology accounting for most of the rest, and impact printers having a very small market share.

The telecommunications and data communications hardware market reached a value of £5.55bn at msp in 1999. The telecommunications sector includes fixed, cordless and mobile telephones, pagers, switching equipment (private automatic branch exchange — PABX — and key systems), automatic call distribution equipment, telephone answering machines, fax machines, audio conferencing equipment and videoconferencing equipment. The telecommunications equipment sector almost doubled in value between 1995 and 1999, mainly because of the boom in mobile telephones for private and business use. The data communications sector also grew strongly in volume, but its value growth was more modest because of falling prices.

The office furniture sector showed a slight decline in value, to £1.1bn at msp in 1999. Sales of swivel seats grew strongly between 1995 and 1999, due to the demands of health and safety legislation, and improved awareness of the importance of suitable adjustable seating. Sales of other types of furniture — both metal and wooden — tended to decline in value. This has been explained by the diversion of budgets to coping with year 2000 compatibility of information technology (IT) equipment, and by customers choosing less expensive furniture ranges.

The copier market was worth £580m in 1999. The market has been fairly flat in value terms since 1995, with some growth in volume. Key trends include a gradual trend towards the take-up of digital technology, falling prices — especially for analogue machines — growth in high-volume copiers and growth in sales of colour copiers as these become more affordable.

The other sectors included in this report are estimated to provide a total value of £746m at msp in 1999. A large proportion of this comes from the booming visual presentation products sector. Ultra-portable digital multimedia projectors have come onto the market, offering light weight and high light intensity at prices ranging between £4,000 and £6,000 (excluding VAT) at retail selling prices (rsp). Sales of larger projectors and sales of electronic whiteboards are also showing growth. The projectors subsector has been forecast to double in volume between 1999 and 2001. Mailroom equipment has also shown strong sales growth.

In terms of constant 1999 prices, Key Note forecasts that the total UK office equipment market could reach a value of £30.49bn by 2004 — a 59% increase over the 1999 value. However, prices will continue to fall in many of the key sectors, so the market is unlikely to reach this size in current price terms.

There are many product areas which are offering strong opportunities for further growth. These include mobile communications equipment, data communications hardware, wire-free data communications, servers and PCs, data storage devices (especially enterprise storage and network storage products) flat monitor screens, videoconferencing equipment, digital dictation equipment, visual presentation products, colour copiers and higher speed colour printers.

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