The channel is mostly upbeat about sales prospects for the hardware market in 2005, according to research by market analyst Plimsoll Publishing.

The research, based on the top 1,000 companies, found that 23 per cent of those questioned feel upbeat about sales prospects for the coming financial year, with many having already increased sales by 14.7 per cent.

However, the research also showed that sales figures are falling by 10 per cent, with margins averaging just 2.6 per cent.

"A high proportion are very cautious about 2005 because they have a self-preservation factor based on previous market history," said David Pattison, analyst at Plimsoll.

The report suggests that companies finding it hard to compete in the 2004 market should try to hang on to current sales, get on top of costs and reduce levels of debt.

"It's easier to cut costs in the hardware market than in software. There are some good examples of companies that have done this and are doing well as a result," Pattison said.

The report also suggests that companies which reported the biggest growth last year are also the most bullish about 2005, with 18 per cent appearing "gung-ho" about financial prospects.

"The gung-ho companies could drive prices in 2005. They have set strategies and are out to gain market share," Pattison said.

Steve McNairn, marketing manager at reseller AK IT Solutions, told CRN that market prospects look promising. But he added: "The market is lead by manufacturers. They have a large control over the market.

"Sales rely heavily on value-added services and upgrades, but it's often down to the company. Resellers still need to get out there and grab business."

crn@vnu.co.uk