Let's summarize:
PC and notebook sales are up
Overall sales are up
Sales at old Computer City stores are up
Same store sales are down
Direct sales are up
Earnings are down
What does all this mean?
I don't think we can account for same store sales dropping because of decreasing unit costs. Even though PCs cost less, the volume should be more than making up for it (50% increase in units sold, the price certainly hasn't dropped 50% in one year). Maybe part of it is software. With the internet, I know that a lot of people find their entertainment there and spend less time with "real" software applications (especially games). Ditto for a lot of reference type software (maps, dictionary, encyclopedia) since you can find it on the web. Peripherals could be the other disappointing area. I think people are holding off on buying items such as DVD drives and USB devices until they are more mainstream. Likewise, I won't buy a new scanner, camera, etc. that doesn't have USB because it will be out dated when USB becomes more prevalent. I'm waiting. Same for modems, everyone already has 56K (it comes with every PC now) and until swome new standard comes out, few people are buying them. One last point, people aren't buying hard drives, memory, and video cards like they used to. A PC costs so little, they just replace the whole thing. Anyway, I think that the Direct business has incredible growth prospects. It really is unbelievable that only $68M of $1.6B was from Direct sales. |
