Tuesday November 27 5:42 PM ET
Holiday PC Sales Rise From Year Ago Levels
Audio/Video
[Audio] Analyst says holiday PC sales seem on track, prefers Dell - (ON24)
[Video] Market Recap: Markets hit speed bumps on spending fears - (ON24)
By Caroline Humer
NEW YORK (Reuters) - Personal computer sales improved during the Thanksgiving weekend from last year's weak levels as bargain-hunting consumers took advantage of rebates and sale tags, PC makers and analysts say.
Despite the economic downturn, PC makers, including Compaq Computer Corp. (NYSE:CPQ - news) and Hewlett-Packard Co. (NYSE:HWP - news), which plan to merge next year, said consumers bought more computers and electronics than a year ago.
Wall Street analysts concurred. Influential Bear Stearns computer hardware analyst Andrew Neff said on Tuesday that according to retail stores, including Best Buy Co. (NYSE:BBY - news), Circuit City Stores (NYSE:CC - news) and Comp USA -- and even some PC makers, sales were in line with lowered expectations.
``Almost none of the retailers we checked with complained of a sharp disappointment,'' Neff wrote in a research note.
And as in the broader retail sector this weekend, demand focused on less expensive computer packages, according to A.G. Edwards analyst Brett Miller.
``From everybody I've talked to, it's more low-end skewed,'' Miller said. ``They're buying the $699 PC package, which, with peripherals, software and stuff, is rounding out at about $1,000 to $1,100. Previously, we were seeing people rounding out between $1,500 and $1,700.''
The Thanksgiving weekend traditionally marks the beginning of the crucial holiday shopping season, and the fourth quarter is typically the strongest for PC makers. Last year's weak sales not only kicked off a long slump in the PC industry but also sparked a price war among computer makers.
With the economic recession as a backdrop, the Thanksgiving weekend now seems increasingly important, Miller said.
``There are only so many dollars to spend. I think everybody concludes the dollars will be tighter this year than in some Christmases past, so first in is going to be the winner,'' he said.
Miller's comments were in line with those from Hewlett-2Packard, which on Monday said that PC sales rose as much as 10 percent or more during Thanksgiving weekend compared with the year-ago weekend.
A Compaq spokesman, meanwhile, said retail sales had improved this Thanksgiving from the previous year. Compaq sells computers in stores and through direct channels, including over its Web sites and via kiosks that are located in stores.
Gateway Inc. (NYSE:GTW - news), which focuses on the consumer market, had sales that were slightly better than expected according to checks with certain stores, Neff said.
Gateway declined to comment.
The No. 1 PC maker, Dell Computer Corp (Nasdaq:DELL - news), also declined to comment specifically on sales during the weekend. A spokesman said only that consumer demand seems strong and that the company is encouraged by the significant amount of customers contacting it over the Internet.
Dell, which sells directly to consumers and businesses, has been winning market share from its rivals all year, and overtook Compaq as the No. 1 PC seller this spring.
But while a strong holiday buying season could be a positive in the short-term for PC stocks, it may be too late to buy those stocks given expectations of a weak first half of 2002, Neff said.
When demand does turn around, most analysts expect it to come from increased corporate demand as companies begin to upgrade computers. Even microprocessor giant Intel Corp.(Nasdaq:INTC - news) says it has some pent up demand for PCs.
Chief Financial Officer Andy Bryant said that more of its technology spending next year would go to personal computer upgrades, as opposed to networking, which was emphasized over the past year.
``The mix will change dramatically. We cut back on desktop improvements last year. We really slammed the door on PC spending,'' Bryant said. ``The place where we will under-invest (next year) is the basic network.''
Shares in PC companies were mostly lower on Tuesday, as Dell gave up 1.6 percent to end at $26.48 on the New York Stock Exchange (news - web sites) while Compaq lost 4.2 percent to close at $9.52 on Nasdaq.
Gateway also gave up more than 4 percent to close down 39 cents at $8.32 while Hewlett-Packard fell 3.9 percent to $20.30. The American Stock Exchange Hardware Index, meanwhile, was down about 1.5 percent. |
