The euro has been lower, falling as low as $0.82 in October 2000 after starting at $1.17 when it first appeared on 1 January 1999 and peaking at a high of $1.60 in July 2008.
Vendor view
Atwal’s comments about the impact of currency have already been reinforced by HP, one of the world’s biggest PC vendors. HP CEO Meg Whitman drew attention to the strength of the dollar and the effects of currency fluctuations when the company announced results for its first quarter in February. She even put a figure on the effect, estimating that currency fluctuation “equates to approximately $3.3 billion in revenue, $1.5 billion in operating profit, or $0.60 in earnings per share”.
She confirmed that HP would have to change pricing to try and mitigate the effects but would only be able to manage half of the $3.3 billion “through re-pricing and cost actions”, adding that the vendor would experience “a negative earnings impact of approximately $0.30 per share, entirely due to currency”.
She also highlighted concerns that fully mitigating the currency movements would “require reducing investments in areas like innovation, key systems and tools and placement of printer units”, adding that it “simply would not be the right thing to do”.
HP has already raised prices in Europe to try and mitigate the effects of the dollar’s rising value. But the worry must be that if the euro keeps on sliding against the dollar, the vendor may have to raise prices again or take an even bigger hit. Other US technology companies are likely to be faced with the same issue. For example, before Apple announced pricing for its latest MacBook at the beginning of March, it was probably hoping to come in with a price tag of around €1,299, which would have been achievable if the euro had stayed around the $1.20-$1.30 mark. As it is, the product is now priced at €1,499. It will be interesting to see where the Apple Watch euro price comes in compared to the entry price of $349 in the US.
It is pretty obvious that price rises in the wake of the euro’s decline are unlikely to prove popular with customers in Ireland. The difficulty is that with the PC market declining, it’s hard for vendors to absorb the revenue hit and keep prices unchanged if that means sales outside the US generating fewer dollars for headquarters.
So, not only do PC vendors and their channel partners have to contend with a market in 2015 where there is slowing momentum to buy new products but they have to do so while trying to sell those PCs for a higher price than they did last year. And all this is happening at a time when customers are more likely to upgrade their smart phone than their PC.
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