COMPUTER HITS 2001

by Irina Lakaeva, U.S. Commercial Service in Moscow

Summary: This report gives an overview of the most popular products in the Russian computer market in 2001. It may be useful for U.S. companies investigating the Russian market. This report is based on an analysis of data from PC World magazine, a Russian edition, and interviews with industry specialists during "The World of Computers" trade fair which was held in Moscow, January-February 2002. End Summary

1. Overview. Russia represents a growing and dynamic market for IT industry suppliers. According to research by Brunswick Warburg, IT market volume in 2001 exceeded 3 bln USD. The rate of growth is strong, with recent figures showing 18% year-on-year. This growth was due to a favorable economic situation and high demand in the corporate sector as well as interest by the government in promoting information technologies. Government plans to spend 2.6 bln USD on the E-Russia program and 1.9 bln USD on the development of a single information environment have led to a dramatic rise in computer deliveries to the government and education sectors.

The Russian consumer sector represents a huge potential demand for the full range of IT products. However, this demand is significantly constrained by low levels of average disposable income. Current demand for PCs, for example, is being met largely by low cost products, assembled by Russian manufacturers from foreign components. As salaries continue to rise, it is expected that demand for imported computers will rise rapidly.

In the meantime, there is a growing demand in the corporate sector, which is less price-sensitive, as well as the dramatic growth in PC deliveries to the education sector being funded under federal and regional programs. Imports account for 15 percent of Russia's personal computer market. Best immediate prospects also include management software and Internet technology.

2. PCs: Desktops dominate the market at the moment and Russian brands dominate. The leader in the sector has become R&K Wiener 3 and Formoza brands. Formoza actually accounts for10 percent of the market. Among foreign brands Hewlett-Packard is leading with the HP Vectra VL400. Compaq is in second place (18%) and Acer is third (8%). According to the top suppliers a stable economy and growing demand from governmental organizations and major companies in the mining, oil and gas and industrial machinery sectors are the main reasons for the surge in sales.

Notebooks: The demand for notebooks in Russia is quite stable, though it is still lower than in Europe. The most popular model in 2001 was a local brand, Bely Veter, with a market share of about 4 %. Fujitsu-Siemens notebooks are in the second place followed by Apple.

Servers: This kind of product is more complicated and it is harder to assemble locally. However, the trend is towards growth in the market share of Russian producers such as Vist and Aquarius. This sector still relies on top-shelf server products from major foreign firms such a Unix and NT.

Monitors: Japanese and Asian products dominate the market with Sony Multiscan G 200 (27%of respondents) and LG Flatron 795FT (23%). According to Interfax more than 2 million PC monitors were sold in Russia last year. As elsewhere, LCD monitors are taking a growing share of the market, though given the low incomes in the country it is happening at a much slower pace.

Printers: HP is the leader in the Russian market followed by Epson and Canon. The model of the year was the HP DeskJet 930C. For laser printers, the HP LaserJet 1100 is way out front.

Scanners: The market for scanning equipment is highly concentrated, with four vendors dominating: HP (24.5%), Mustek (16%), Umax (12%) and Epson (10%). The hit of 2001 was the HPScanJet 5300C.

3.Software: According to IDC Russia the dominant operating system for PCs in Russia is Microsoft. The hit is Microsoft Windows 2000. Linux has 2.3 % and Mac OS ? 0.3% market share. Regarding antiviral programs AVP of Kaspersky Lab was chosed by 55% of respondents followed by Doctor Web (23%) and Norton Antiviral (19%).

The enterprise software market is considered to be the fastest-growing segment of the software industry in Russia. The market volume is estimated at 150m USD in 2001. Local products of 1C, Parus and Galaktika are the most popular solutions for oil and gas and manufacturing companies followed by the high-end SAP R/3 which was chosen by Alrosa, Rostelecom and the Ministry of Railways.

Entertainment software: The volume of this market varies from 50 to 75 mln USD but it suffers greatly from extensive pirating. According to Nival company only 25% of computer games were sold legally in 2001. The most popular games in Russia are FPS (first person shooter) products. Among the hits of 2001 were Heroes Chronicles of the 3DO Company, New World Computing and several local FPS gamers from 1C and Nival Entertainment.

The Russian IT market continues to develop rapidly, with a projected average growth rate of about 10-15 % through 2002 in terms of value. While strong demand for basic hardware will persist, an increasingly larger share of spending will be devoted to software and services. This sector will represent a promising market for U.S. exporters. For example, in July 2001 Aeroflot, the largest Russian air carrier, signed a five-year agreement with U.S. Sabre Holdings Corp that will provide the airline with $10 million worth of software products. Aeroflot will use the software for revenue management, pricing, network management and scheduling and operations.

4. The U.S. Commercial Service (CS) Moscow encourages U.S. companies wishing to do business in Russia to utilize our services. For more information about our services and programs, please see our website at: http://www.buyusa.gov/russia/en/ or http://www.BuyUSA.com For more information on the Gold Key Service, and a range of other export support programs in IT industry, please contact:

Irina Lakaeva Commercial Specialist US&FCS U.S. Embassy Moscow 23/28 B. Molchanovka, Bldg.2 Tel.: 7(095) 737-5022 Fax: 7(095) 737-5033 e-mail: Irina.Lakaeva@mail.doc.gov