NEW YORK, Feb 4 (Reuters) - Moves by two major U.S.
companies to provide free or subsidized personal computers to
their staff indicate a transformation is taking place in the
way computers are sold to consumers and threatens to undermine
the business of electronics retailers.
Ford Motor Co. <F.N>, the nation's No. 2 automaker, said on
Thursday it would be giving its 350,000 employees free
Hewlett-Packard Co. <HWP.N> personal computers and printers, as
well as Web access for a fee of $5 per month.
On Friday, the fourth-largest U.S. air carrier Delta Air
Lines Inc. <DAL.N> said it would also subsidize personal
computers and Internet access, offering its 72,000 employees
home computers for up to $12 per month over 36 months.
"If this trend were to pick up it would have an impact on
retail sales and I suspect on some direct sales," said Lou
Mazzucchelli, an analyst at New York-based brokerage Gerard
Klauer Mattison & Co.
"If you're an average employee at Ford who can suddenly buy
a machine at a bargain-basement price, subsidized by your
company, why would you ever want to walk into a retail store?"
he asked.
The programs have a number of benefits for the companies.
They provide an attractive perk for staff that does not cost
the employer the world, while helping to increase their
workforce's computer skill levels and improve internal
communications.
There may also be productivity and cost benefits in the
future if more staff switch to telecommuting.
Sales of PCs through U.S. retailers rose 12 percent in
December, the slowest unit growth rate for any month of
1999 on a year-on-year basis, according to research firm PC
Data. Sales rose 24 percent in 1999 over 1998, but revenues
remained flat at $9.2 billion as average prices plunged.
If hundreds of thousands of workers at companies like Ford
get their PCs from their employers then the potential market
for electronics retailers such as Circuit City Stores Inc.
<CC.N>, Best Buy Co. Inc. <BBY.N> or CompUSA Inc. <CPU.N>
shrinks.
However, some retailers put a brave face on the issue.
"We'd love for everyone in the world to have a computer,"
said Suzanne Shelton, a spokeswoman for CompUSA, the No. 1 U.S.
computer superstore chain, adding that she's not concerned that
the Ford and Delta deal will hurt sales.
"The margins are thin, but that's a fact of our industry,"
Shelton said. "What's also true is that once people get a PC
and they get a little familiar with technology, then they want
the other things that we sell in our stores."
Analysts also said that because direct sales of PCs have
only recently taken a turn for the better, direct sellers such
as Gateway Inc. <GTW.N> might also be looking to improve
consumer sales through deals with their corporate clients.
A spokesman for Dell Computer Corp. <DELL.O>, the world's
No.2 PC maker, said the company already has employee purchase
programs with several major clients.
These include Boeing Co. <BA.N>, General Electric Co.
<GE.N>, American Express Co. <AXP.N>, Time Warner Inc. <TWX.N>
and even Ford, where employees have the option to buy a
computer at a discounted rate. He declined to disclose the
volume of units sold through these agreements.
"It makes perfect sense and just think if you would be able
to do it with other large U.S. corporations, as well as
professional unions and government agencies," Mazzucchelli
said. "There are all sorts of places where you might be able to
play this game."
(( -- Monica Summers, New York Equities Newsdesk, (212)
859-1671, monica.summers@reuters.com)) |
