Apparently PC sales for Nov. and Dec. were pretty bad
Throwing In the Towel: The PC Biz Is in a Box
By Jim Seymour
Special to TheStreet.com
1/1/01 8:00 AM ET
The report from Bear Stearns that circulated on the Street on Friday brought more gloom and doom to the PC hardware and software front. Added to retail's experience in the Christmas quarter, it looks bad for the PC industry ... and bad looking ahead, not just looking back.
Let me tell you about some figures I've seen lately on computer retail sales. They cover October, November and December ... and they are really grim. This is that fat quarter, of course, where consumer purchases of personal computers, leading up to Christmas Day, have exploded for a decade and a half. It is when many computer companies focused on retail make as much as half their annual profit.
In October, PC retail sales were not only not up in double digits; they were -- heresy! -- down 16% year over year. In November, they were down 17%. And for the first three weeks of December, they were down more than 20% -- all year over year. That's catastrophic for PC makers. Retail has been driving the business for six years now, and for it to sag this sharply forecasts big trouble ahead.
Worse, even the rumored post-Christmas round of price cuts, to move all that remaining inventory, are unlikely to help much. There is limited price elasticity in consumer PC sales -- and PCs are already cheaper than ever.
People didn't buy PCs because:
More than half of U.S. homes already have one or more.
There is nothing new in the market that makes those existing machines obsolete, ready for replacement.
People without PCs today in many cases have no interest in them.
Many PC users' attention has moved on to other devices, such as personal digital assistants.
There was no "software imperative" to move up to a new PC -- and there's unlikely to be any in the next year.
Pow, zowie, bang. Don't look for much help for PC makers from retail in 2001.
On the commercial PC side, companies are holding onto their PCs much longer, buying more midrange and lower machines when they do buy, focusing IT spending on servers and storage and faster access, and reducing IT spending overall.
So don't look for much help there, either.
The boxmakers can try hard to find new revenue -- such as Gateway's (GTW:NYSE - news - boards) much heralded-push for "beyond the box" revenue from services. But I have come around to the view that no PC maker is safe to hold today. And I don't expect to see that change for some time to come.
The market has moved on. Beware.
-------------------------------------------------------------------------------- |
