Here is an update on PC sales... It is not excellent news, to say the least. If the upcoming BTB is not very strong, we will see a definite correction in INTC's price.
Here it goes...
Holiday PC Sales Are Lagging
Expectations (12/4)
By WES CONARD
c.1996 Bloomberg Business News
NEW YORK -- Personal computer sales over the crucial
Thanksgiving weekend lagged expectations at more than a third of
U.S. electronics retailers, adding to concern about an already
disappointing season for PCs.
Consumers, unenthusiastic about new offerings, failed to respond even
to unprecedented giveaways. Analysts now expect November to rival
October as the worst month ever for PC sales at U.S. stores.
``It's tough and it's ugly,'' said Beth Richard, an analyst at Everen
Securities. ``It's never been so bad with the combination of no new
products, prices plummeting and intensified competition.''
Retailers including Best Buy Inc., Circuit City Corp. and Tandy Corp.
are expected to report same-store sales Thursday that are 5 percent
to 15 percent lower than year-ago levels. PC sales will be even
worse, analysts said.
As a result, retailers are chopping already thin margins and offering
plush financing deals -- no down payments, no interest -- to draw
customers. That will short-circuit profits for many and likely push
some retailers out of business.
PC makers that focus on the consumer market will suffer as well.
Apple Computer Inc., Packard Bell-NEC and Acer Inc. are among
those likely to be hardest hit, as new entries from Sony Corp.,
Toshiba Corp. and Compaq Computer Corp. vie for consumers'
dollars.
``This year is going to separate the men from the boys, and some
companies will not survive,'' said Kurt Barnard, a retail consultant and president of Barnard's Retail Market Report.
One exception may be CompuUSA Inc., which gave away a 13-inch
color television with the purchase of a PC, said Jack Seibald, an
analyst at Blackford Securities. CompuUSA is on target to meet sales
expectations for the holiday and the quarter to date, he said.
Competitor Best Buy, meantime, offered no payments until January
1998. Computer City and Circuit City offered no payments for a year
and free monitors, or money off monitors. They also have thrown in
free monitors and printers during special promotions.
``There's been a lot of news about Christmas getting better, but that's not true in consumer electronics,'' said Everen's Richard.
A survey of 50 stores by Lehman Brothers found 34 percent said
sales were slightly worse than expected over the Thanksgiving
weekend, while 2 percent said sales were significantly worse. Twelve
percent said sales were significantly or slightly better; 52 percent said sales met expectations.
Consumers may be holding out for computer technology set to hit the
shelves early next year. Intel Corp.'s new MMX chip that perks up a
computer's multimedia capabilities and the new digital video disk
systems for computers and TVs that can store an entire movie on a
disk, both will be available after Christmas.
``Like a lot of people, I'm going to wait for those two things before
buying another computer,'' said Gerard Hallaren, a technology analyst
with Invesco Capital Management.
For PC makers, the crunch come on the heels of Christmas 95, when
sales were higher, but lagged expectations in the wake of the stellar
1994 season. A $1 billion industrywide marketing blitz for Microsoft
Corp.'s Windows 95 operating system perked up the market for
sophisticated PCs but failed to move entry-level machines.
Computer makers were stuck with inventories of lower-end systems
going into 1996. That and disappointing corporate demand led to
bloated inventories and price cutting to move outdated machines.
Some analysts said the weaker consumer sales won't have the same
impact this year because corporate demand is still strong, thanks in
part to companies upgrading computers to take advantage of
Microsoft's Windows NT operating system. International demand also
is strong.
``The corporate business is real strong and the consumer business is
okay,'' said Invesco's Hallaren.
The U.S. consumer market accounts for about 16 percent of the $140
billion global PC market.
That's little comfort for retailers, where slow sales in an already
competitive market may push some out of business.
Most likely to close its doors is Tandy's 17-store Incredible Universe
electronics and appliance chain, which is expected to lose $90 million
this year.
Tandy, which also operates the Radio Shack and Computer City
stores, recently said it would do whatever is necessary to make the
store more profitable, including cutting more personnel and closing
more stores, according to a recent Securities and Exchange
Commission filing.
Many analysts also expect Tandy to sell its Computer City chain. The
No. 2 PC chain is expected to lose $60 million this year, in part
because it has not developed a corporate business to bolster its
low-margin home computer sales.
Even better-established retailers such as Best Buy, the largest
consumer electronics seller, may be hurt by the margin crunching
competition. A year ago, it was forced to extend payments to vendors
so not exceed its limit of $50 million in outstanding bank debt.
PC retailers also are losing market to mail order companies, like
CDW Computer Centers Inc., and computer makers that sell directly
to the public by mail, like Dell Computer Corp. and Gateway 2000
Inc.
Sales at the top eight mail-order and direct vendor companies will rise an estimated 38 percent to $16 billion this year, said Tom Courtney, an analyst at Montgomery Securities.
``What you are going to have to see is some consolidation, some
fallout and some new product or we are not going anywhere,''
Everen's Richard said.
(The Bloomberg web site is at bloomberg.com )
NYT-12-04-96 1522EST< |
