|The threat from abroad|
Positivo Informática disappoints in competition with large global players
Not even recognition, such as the title of the largest company for PCs and notebooks (300 Maiores [Largest], in the IT magazine Computerworld), nomination for the top position in the IT segment in Brazil (Anuário Valor 1000) and Top of Mind 2010 (in the notebook category), all accolades from last year, could save Positivo Informática from being punished by investors. Shares of the largest computer manufacturer in Brazil recorded an accumulated drop of 34.07% as of closing on 30 November 2010 compared to the market closing of 31 May — the worst performance on the list created by Economática for this column. The explanation for the lack of trust regarding this company, present in 8,000 schools and an educational technology leader, has its origins abroad.
Positivo Informática has been facing strong competition from multinational companies that want to overcome the reduced opportunities of the economies in North America and Europe. Excited about the effervescent Brazilian market - the lowest unemployment rate in recent times, greater access to credit and the rise of the C, D and E social classes - competitors have arrived offering prices much lower than those of Positivo.
Under pressure, the Brazilian manufacturer has cuts prices too. Over the last 12 months, the company has cut the prices of its notebooks by 16.9%. With regards to desktops, the average price reduction was lower: 4.5%, thanks to an increase of 6.1% in the prices of such computers - sustained by deliveries to fulfill an agreement with the Ministry of Education (MEC). According to analysts, the partnership with the government is an important fallback position for the company, and should correspond to the delivery of 400,000 PCs in 2011.
In practice, the steep devaluation of Positivo shares reflects what has been presented in its statement: significant drops in profit margins and higher costs. In the third quarter of 2010, the Ebitda margin was reduced to 3.6%, compared to 10.2% for the same period in the previous year. “There is no doubt that the company is suffering greatly from competition from the great international players. The numbers, not necessarily the sales figures, but the margins are much less than what they could be”, says the chief analyst at the Ativa brokerage, Luciana Leocádio.
The sales volume for the period from July to September, amounting to 521,800 computers, was the second best quarterly performance in the history of the company and 8.9% greater than that recorded from April to June, thus ensuring a 14.1% share of the Brazilian market. But it was 1.3% below that of the same period in 2009. “We had a sales quarter in line with what we expected”, claimed Hélio Rotenberg, CEO of the company, in the presentation of results to the market on 11 November.
The executive explained that the greater volume in the third quarter of 2009 was due in part to advance deliveries of part of the retail demand for the three following months. From January to September 2010, Positivo’s total sales reached 1.43 million computers, growth of 10.3% compared to the first nine months of the previous year. On the same comparative base, the net profit of Positivo amounted to R$ 83.3 million, 4.4% greater than the result for the same period in 2009. However, the net profit for the third quarter of 2010, R$ 15.3 million, was 50% less than that obtained in the immediately previous quarter, which was R$ 30.2 million, and 74.1% less than that recorded for the period from July to September 2009.
One issue that Positivo faces, according to analysts, is a heavy cost structure, inflated by sales expenses and after-sales service commitments. Issuing a type of “mea culpa”, Rotenberg recognized that the shrinking of Ebitda margins has rung alarm bells within the company. “This makes us look inwards and realize that we have opportunities to reduce our fixed costs, which is our great challenge from here on out”, he stated.
But the market indicates that Positivo also has other obstacles to overcome. One obstacle, in the opinion of analyst Diego Aragão, of Flow Brokerage, is to find a differential that puts it in a more favorable position in front of its competitors. “The PC market is the company’s forte, but it will not sustain it much longer. The hardware segment, in general, is standardized. Positivo should direct itself towards services, which is what the great global players are doing, but we don’t see this paradigm shift happening within the company”, he said. According to the analyst, Positivo’s market strategy is not yet clear.
Investors seem to be suspicious, when one considers the 1.6% drop in share prices December 6, when the Brazilian company announced the formation of a joint venture with Argentine company BGH to manufacture and market information technology products in that country and in Uruguay. “This internationalization is good to reduce a little of Positivo’s exposure in the domestic market. But we still need to see the first results, to know to what extent the company’s margins will improve and what their distribution network will be like”, says Aragão.