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Hardware and Educational Technology Industry

Share

Hardware and Educational Technology Industry

Since the fourth quarter of 2004, the Company has led the Brazilian market, and currently is the 3rd largest manufacturer in Latin America, even with sales only in Brazil and Argentina, to this moment. In the world as a whole, it is ranked 13th overall (12th in desktops and 11th in notebooks)1.

Positivo - 2013 PCs Desktops Notebooks
Brazil 1st 1st 2nd
Latin America1 3rd 4th 5th
World1 13th 12th 11th

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Source: IDC - International Data Corporation

1 Considering sales under the Positivo and Positivo BGH brands, in Brazil and Argentina, respectively.


The level of market penetration of PCs varies greatly from country to country in Latin America, in particular when compared to other regions around the world. According to the ITU (International Telecommunication Union), Trinidad & Tobago led the rankings in 2010, with a penetration rate of 53.1%, followed by Uruguay with 52.8%, and Chile with 46.8%.

Growth in Brazil has become increasingly aggressive. Around 12 million computers were sold in Brazil between 1997 and 2001, climbing to 19 million between 2001 and 2005 and reaching around 85.5 million in 2006 and 2012. In 2013 alone, sales totaled 13.9 million units, generating revenue of US$10.2 billion. Official market sales grew at an average of 31.0% per year between 2004 and 2013, rising from 962,000 to around 10.9 million.

Brazilian PC Manufacturer Rankings (units - 2013)
Position Company Market Share
1st Positivo 15.3%
2nd Company A 13.4%
3rd Company B 8.6%
Other 41.1%
Grey market 21.6%
Total 100.0%

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Source: IDC - International Data Corporation


This growth was fueled by three main factors: the price slide triggered by the devaluation of the dollar and the tax reductions, the upturn in retail credit and distribution, and the increase in family income.

Falling Prices

Between 2004 and 2013, the average PC price in Brazil fell by 28.6% (32.9% for desktops and 73.3% for notebooks), primarily due to the 22.1% devaluation of the dollar, given that more than 90% of a PCs costs are dollar-pegged. The 9.25% reduction in PIS/COFINS taxes for computers costing up to R$ 4,000 also helped bring prices down.

The average dollar desktop price remained flat, as can be seen in the graph above. Dollar notebook prices, however, recorded successive reductions until 2007, benefiting from the industry’s gains in scale. More recently, the decreased price of notebooks is the result of greater competition on the retail market and the volume of educational laptops allocated to technology inclusion programs in the country’s public education sector.

Increased Credit and Purchasing Intentions

Also between 2007 and 2013, the volume of credit for individuals grew at an average annual rate of 15.4%, particularly benefiting the lower income groups; and the retail sector has played a vital role in this process. The vast majority of PCs sold on the retail market are financed in 12 installments or more; currently one can find retail computers financed in up to 24 installments with monthly payments of R$ 59.90.

In June 2005, the federal government launched the Computers for All program, which allowed desktops costing up to R$ 1,200 and notebooks up to R$ 1,800 to be financed in up to 24 installments with interest of not more than 2.99% per month.

Increased Income

The change in Brazil’s socio-economic profile has been massive in recent years. The C income group increased its share of the population from 34%, in 2005, to 54% in 2011. In absolute terms, no less than 40,4 million people entered this group in 2005 and 2011.

Also between 2005 and 2011, the C group’s disposable income increased by 198% to R$ 363.00 per month, more than enough to cover PC installment payments.

PC Penetration

The price slide, coupled with the expansion of credit and higher earnings, triggered an increase in the number of PC-equipped households, especially in the C group, which climbed from 16% in 2005 to 45% in 2011.

Income Group 2006* 2008* 2010 2012
A 86% 95% 93% 98%
B 63% 70% 76% 84%
C 19% 25% 34% 44%
D/E 3% 3% 5% 9%
Total 20% 25% 35% 46%

* Excludes the rural population, which was included in 2010 and 2012.

Source: TIC 2011

This upturn, plus the low overall household penetration of PCs at the moment means that there is a potential first-purchase market of around 17 million computers. It is also worth mentioning the exceptionally low penetration of notebooks which is currently growing at a faster rate than desktop penetration, especially in the higher income groups. In addition, there is also a substantial repositioning market - the average working life of a PC in Brazil is estimated at 5 years.

The retail segment was chiefly responsible for the growth of the official market, given its role as the main financing vehicle for the B and C income groups, who are currently acquiring their first PC. Between 2005 and 2013, the retail segment averaged annual growth of 30.8%.

Brazilian Retail Market Rankings - 2013
Position Company Market Share
1st Positivo 20.4%
2nd Company A 15.2%
3rd Company C 10.9%
4th Company B 9.2%
5th Company D 7.3%
6th Company E 4.5%
Others 32.5%
Total 100,0%

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Source: IDC - International Data Corporation

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Educational Technology Industry: Educational Portals and Software

An analysis of the numbers and the present education environment points to factors that are likely to enable strong growth in the medium- and long-term. In Brazil, about 90% of the country´s almost 200,000 elementary and high schools are public and only a minority of them have access to computers, the Internet, and educational technology. This low level of digital inclusion applies to the federal, state and municipal public schools alike. Private schools have far greater access to educational technology, since they encompass pupils from classes A and B and have more funds to invest in advanced educational products and in services to improve education and lead the competition.

From 2000 to 2005, the percentage of public elementary schools with access to the Internet grew from about 3.9% to 14.8%, still far below the rates applying in developed market countries. By way of comparison, by 2000, 98% of the US public schools had access to the Internet. The number of Brazilian public elementary schools with at least one PC also increased from 2000 to 2005, but only to 31.7% in 2005, and this low percentage includes use of PCs for administrative, rather than educational purposes. By contrast, 60% of the private elementary schools in Brazil accessed the Internet and 84% had at least one PC in 2005. In high schools only 51% of the public schools had computer laboratories in 2005, compared to 77% of the private schools.

OECD studies have continually pointed to Brazil ´s delay in providing Internet and computer access to Brazilian students. The 2006 survey by the Program for International Student Assessment, or PISA, indicated that of the 57 participant countries, Brazil was third last in terms of numbers of PCs per student in schools, behind two other emerging market countries, Indonesia and Russia, where the computer/pupil ratios surpassed that of Brazil by 50%. The average PC-per-student ratio in other participant countries is eight times higher than in Brazil.

Considering that the growth of the educational software and portal markets in Brazil are fundamental to both the digital inclusion program and the objectives of investments in the improvement of public education, and given the factors discussed above and the already substantial size of the Brazilian student population, the Company believes that the educational technology industry has potential for substantial growth in the medium and long-term.

Surveys conducted by the OECD and the Instituto Nacional de Estudos e Pesquisas Educacionais Anísio Teixeira, or INEP, the Brazilian National Institute for Educational Studies and Research, a body of the Ministry of Education, point to a positive correlation between usage of the Internet and computers and scores on tests organized by PISA and the Exame Nacional do Ensino Médio, or ENEM, the Brazilian National Secondary Education Examination. Computer education in public schools is also essential in order to provide access to an almost inexhaustible source of knowledge for that part of the population that risks being digitally excluded. With an increase in the availability of PCs to all social classes, particularly classes C and D, partly due to the "Computers for Everybody" program, Positivo Informática expects strong growth in the direct sales of educational solutions and portals for schools, and in the retail sales of educational software.