PC sales growth slowing?
When there is a new OS upgrade, some customers might hold off buying a new/replacement PC. But normally you get a free upgrade to the OS when you buy a new PC (and the upgrade is scheduled to be shipping in the next couple of months).
The share price of CPU has been falling for a while, based on lower earnings estimates, blamed on falling PC prices.
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biz.yahoo.com
Wednesday July 1, 8:37 pm Eastern Time
FOCUS-CompUSA sees Q4 loss amid weak computer sales
By Kieran Murray
DALLAS, July 1 (Reuters) - CompUSA Inc. (CPU - news) warned Wednesday it will report a loss
for its fiscal fourth quarter due in part to weak sales of personal computers as customers held back
until last week's release of the Windows 98 operating system.
The nation's largest computer retailer said its sales for the three months ended June 28 were $1.19
billion, up just 3 percent from the same period last year, and that it expected to lose between $0.15
and $0.20 per share for the period.
CompUSA had profits of $0.24 per share in the fiscal fourth quarter last year and analysts tracked
by the First Call investment research network had expected it to show profits of about $0.07 for the
latest quarter.
The projected loss does not include a one-time charge of $30 to $35 million which CompUSA said it
would incur for implementing a new information technology strategy which involves outsourcing much
of its IT processes.
Chief Executive Officer James Halpin said he was ''very disappointed'' with the financial results,
which will be released on August 12.
But he stressed that a reduction in unit sales of personal computers was largely due to customers
waiting for the release of Microsoft Corp.'s (MSFT - news) Windows 98 on June 25, just three days
before the end of the quarter.
''Basically, it was just a wait-and-see quarter. Customers were waiting for Windows 98 to come
out,'' Halpin said in an interview with Reuters. ''That product transition, as well as other factors, put
significant pressure on both sales and margins.''
Comparable store sales for the 127 stores open one year or more were down 8.7 percent.
For the full fiscal year, comparable store sales were up 1.7 percent and net sales were up 15 percent
to $5.29 billion.
Halpin said declines in the average selling price for desktop and notebook computers and monitors
as well as a shortage of notebooks using Intel Corp. (INTC - news) Pentium II chips also hurt sales.
The Dallas-based retailer said average sales at its superstores were about 15 percent lower than in
last year's fourth fiscal quarter.
Gross margins also fell to between 12.3 and 12.7 percent of sales, down from 14.1 percent in this
fiscal year's third quarter and from 14.8 percent in the year-ago fourth quarter.
Advertising costs also rose and expenses for promoting its mail order division were higher than
expected.
Halpin, however, said he was ''encouraged'' by the customer response to Windows 98 and
predicted continued investment in CompUSA's main businesses would bring improved efficiencies
and opportunities in the long-term.
''Windows 98 has been out for six days and we are very pleased with our business currently,'' he
said.
CompUSA made its earnings warning after the stock market closed. Its shares had earlier finished
62.5 cents lower at $17.44 on the New York Stock Exchange, bucking a 1.3 percent rally by the
Standard and Poor's 500.
CompUSA last week agreed to buy the rival Computer City chain of stores from Tandy Corp.
(TAN - news) for $275 million.
Copyright c 1998 Reuters Limited.
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