December Slowdown Curbs Channel Q4 Revenue Growth

A poor final few weeks of 2022 led to a below-anticipated fourth-quarter revenue growth of 1.1% in the European IT channel.

Figures from IT market intelligence Context show strong year-on-year revenue growth in October (4.9%) and November (3.8%). However, December’s figure of -4.3% dragged the quarter’s final total down. This was influenced in part by comparatives with a high-performing December 2021, it said.

The final revenue figure of 1.1% is markedly lower than Context’s central assumption of 6% YoY growth for the quarter. This, it said, can be explained in part by underperformance in specific markets, and in the important personal systems sector.

The three-month period was driven by value sales, which grew 13.1% YoY after an even stronger third quarter (22%). Meanwhile, volume sales declined 7.1% year over year in the fourth quarter following a modest 2.8% growth in the third quarter.

Small and medium resellers (SMRs) continued their strong performance from the third quarter (16.2%) to record a year-over-year revenue increase of 6.6% in Q4. These were the only channel to post positive growth.

A comparison of hardware categories shows that the fourth quarter followed previous quarters in the overall market trend. These saw unit sales declining, average selling price (ASPs) increasing and revenues remaining flat as a result.

Positive Growth

Only servers (4%) and disk arrays (6%) posted positive year-over-year unit growth in Q4. Notebooks (-23%) fared particularly badly — far worse than Context’s most pessimistic predictions.

There were big year-over-year ASP increases for network switches (53%), servers (29%) and wireless access points (38%). Only three categories including headsets (-14%) saw ASP declines over the period.

This translated into a mixed picture for hardware revenues, with notebooks down 15% YoY and headsets falling by 29%. A previously strong volume growth category – monitors – saw a 10% declined. Meanwhile, large format displays (LFDs) saw revenue decline for the first time in 2022 (-1%), despite posting a 6% increase in ASPs.

Context’s Simon Adam

“The variance between our Q4 forecast and actual performance can be explained in a large part by the figures for personal systems. [This is] a sector which accounts for over a fifth of revenues through distribution,” said Context global managing director Adam Simon.

“Some countries also underperformed versus our expectations, with Germany, Poland, the Nordics and the rest of Europe all slowing down considerably. We’ll be undertaking more analysis over the coming weeks to dig into the underlying reasons for these figures,” Simon added.

Germany posted a nearly 3% decline, while Poland (1.4%), the Nordics (0.7%) and Rest of Europe (2.7%) were all short of their predicted Q4 revenue growth figures.