Shares of Corsair Gaming (CRSR) turns to the red side as market opened today. Investors think that the company is no longer a viable investment.
The gaming and streaming market is characterized by intense competition, constant price pressure and rapid change. Competition across Corsair’s product offering includes:
Gaming keyboards and mice – Logitech and Razer
Headsets and related audio products -Logitech, Razer, and HyperX
Streaming gear – Logitech and AVerMedia
Performance controllers – Microsoft and Logitech
PSUs, cooling solutions, and computer cases – Cooler Master, NZXT, EVGA, Seasonic, and Thermaltake
High performance memory – G.Skill, HyperX, and Micron
Pre-built and custom-built gaming PCs – Alienware (Dell), Omen (HP), Asus, Razer, iBuypower and Cyberpower.
Competitive Strategy
The company follows a differentiation leadership strategy by prioritizing high-performance and professional quality and charging a price premium on their products in exchange for superior quality, high value added features, and superior brand recognition.
Market Share
According to NPD Group, by 2020 Corsair had #1 market share position in the US in its gaming components and systems products with 42% of the market share from 26% in 2015. Their gamer and creator peripheral products are not yet market leaders, however, the company increased its market share in that segment from 5% in 2013 to 18% by 2020 in the US.
Growth Strategy
Move into the Asia Pacific region:
The Asia Pacific Region represents a long-term growth opportunity. According to Newzoo, they represent 54% of the global gaming community.
Complimentary acquisitions:
Corsair has carried out this strategy aggressively since 2018 with the acquisitions of Elgato Gaming, Origin PC, SCUF and Gamer Sensei. They plan to continue evaluating and pursuing new acquisitions that may strengthen their competitive position.
New Markets:
Uses of streaming gear has spread into areas including, podcasting, video blogging, interactive fitness, remote learning, and work-from-home, which represent a promising avenue for continued expansion in this product segment.
Bottom line
A significant medium – to long-term risk for Corsair’s business model is the evolution of cloud computing and augmented/virtual reality entertainment.
Cloud computing refers to a computing environment in which software is run on third-party servers and accessed by end users over the internet, requiring minimal processing power from the end-user’s system. Through cloud computing, gamers will be able to access and play sophisticated games without the need of expensive high-performance PC systems and components.
According to Grand View Research, the global cloud gaming market is expected to grow at a CAGR of 48% from 2020 to reach $7.2B by 2027.
Additionally, Corsair must be able to adapt its product offering to meet the needs of the evolving augmented/virtual reality industry.
