Sub 1000 PC sales rocket to get on Internet. WSJ article, bodes well for ASCEND, whose equipment enables more than 40% connections worldwide. VERY BULLISH FOR ALL THE INTERNET INFRACSTRUCTURE BUILDERS IN 1999. 1999 -2001 will be remembered well in for may years to come as the golden years for Networkers as far as stock price rise is concerned.
January 8, 1999
Lower-Priced PCs Drove
Strong Sales in December
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Strong holiday sales of low-priced personal
computers proved to be a mixed bag for
electronics retailers: Unit sales for
December jumped 41%, outstripping earlier
expectations, but a 20% drop in average
prices crimped results for some.
PC Data Inc., the
Reston, Va., company
that tabulated the
sales numbers,
estimates U.S.
retailers racked up
about $1 billion in PC
sales for the final
month of 1998, a
crucial period that can make or break a
retailer's results. Not surprisingly, says PC
Data Senior Analyst Stephen M. Baker, "The
lower the price, the more are sold."
Analysts said the mixed results could lead to
further consolidation among retailers and in
the number of PC brands they carry. Skimpy
margins on machines selling for $999 or less
leave little room for forecasting errors. "I
suspect we'll see retailers aligning
themselves with just one vendor, or moving
to holding less inventory," said retail analyst
Ursula H. Moran of Sanford C. Bernstein.
Still, the retail results portend strong
fourth-quarter sales for some PC makers,
such as Compaq Computer Corp.,
International Business Machines Corp., and
Packard Bell NEC Inc., all of which cranked
up production of $599 to $799 home-PC
models. PaineWebber Inc. analyst Don Young
said Compaq, which blanketed stores with
three models under $1,000, "should have a
heck of a quarter."
It also augurs well for direct sellers Dell
Computer Corp. and Gateway, which have
maintained average selling prices of about
$2,000 by focusing on repeat buyers. "The
high-end has disappeared from retail, but it
hasn't totally gone away. It has gone to Dell
and Gateway," says Ms. Moran.
For retailers, the increased
unit sales don't mean a
boom year for the bottom
line. Average prices fell to
$1,015, down 22% from
year-earlier levels and
reflecting the spread of
home PCs beyond affluent
families. Research
MarketMaps LLC, New
Canaan, Conn., estimates 49.5% of U.S.
households own a PC, up from 43% at the
end of 1997. "People buying PCs now are not
willing to spend as much as the early
adopters," said Vadim Zlotnikov, PC analyst
at Sanford C. Berstein & Co. But, he said,
newer buyers' interest in purchasing a PC to
get to the Internet bode well for continued
demand.
PC demand drove sales at stores open at
least a year to double-digit gains at
electronics giants Circuit City Stores Inc.
and Best Buy Co. Best Buy, which saw a
$399 model sell out almost immediately after
its introduction, "had extremely good sales
on low-priced PCs," says a spokeswoman.
PCs were the best-performing product at
Circuit City, fueling an 11% hike in
same-store sales. Circuit City, which
reported results Thursday, said total sales
rose 18% to $1.57 billion.
Even as cheap PCs drove demand, the falling
price tags squeezed sales at CompUSA Inc.
and Tandy Corp., which had hoped for
stronger sales of higher-priced models.
CompUSA, Dallas, said same-store sales
tumbled a larger-than-expected 4.7% in
December from a year earlier, and it issued a
profit warning. "Consumers got a great buy,"
says Chief Executive Jim Halpin, who says
the retailer was forced to discount during the
month.
Tandy, Fort Worth, Texas, saw November
same-store sales flattened compared with
the year-earlier period, and it stayed out of
the low-priced fray. It said same-store sales
for December rise a tepid 5%. Selling through
its Radio Shack chain, Tandy's lowest-priced
model was a $999 PC without a monitor or
printer. Total December sales rose 6% to
$587.2 million, helped mainly by strong sales
of wireless telephones.
By contrast, Dell Vice President Paul Bell
says buyers were loading up on such extras
as digital cameras and scanners to take
photos and send digital images over the
Internet. Dell said this year's best sellers had
twice the memory and about twice as much
storage as last year's.
Likewise, Bart R. Brown, vice president of
marketing for Gateway's U.S. consumer
business, said the company hasn't
"experienced a terribly dramatic slip in
average unit price."
New buyers also tend to spur ownership
among their peers, say analysts. "If I have a
PC, my friends may purchase one to talk to
me," says Bill Ablondi, researcher at
MarketMaps. "There's a snowball effect
building up here." |
