Electronic Accessories on Xmas Listgreenspun.com : LUSENET : Unk's Wild Wild West : One Thread
Friday December 1 3:27 PM ET
Electronic Accessories on Xmas List
By GARY GENTILE, AP Business Writer
LOS ANGELES (AP) - The personal computer may not be dead, but it's showing signs of age as consumers are drawn to newer, hipper electronic gadgets.
``Right now, we have all the features on our computer that we need. There's nothing really new that's out there,'' Diana Poston, 19, said while shopping this week for a DVD player at a Circuit City in Glendale.
The stocks of computer manufacturers took a nosedive this week as Gateway, Micron, Hewlett-Packard Co. and others warned that sluggish domestic demand would mean lower profits for the foreseeable future. Those warnings also dragged down other computer industry stocks, including Microsoft.
The trigger for the profit warnings was lower-than-expected sales over the Thanksgiving weekend. But computer makers and analysts have been worried about weaker sales for months, especially as the general economy has shown continued signs of slowing and rising oil prices have eaten up more of consumers' disposable income.
``Macroeconomics have caught up with everybody after a decade-long party,'' Roger Kay, an analyst with International Data Corp, said Friday. ``Consumers with fewer disposable dollars are looking to throttle back their holiday purchases and buy lower ticket items, such as things that plug into PCs and other devices.''
Sales of desktop computers fell 10 percent in October compared to the same period last year, following three months of slow or no growth, according to PC Data.
``The heady, carefree days of double-digit growth are over,'' Kay said.
In contrast, sales of digital cameras rose 30 percent in October year over year, while flat panel monitors showed a 150 percent increase and even standard 19-inch monitors rose 50 percent. Sales of handheld computers and personal digital assistants were up more than 100 percent.
Those trends have a bigger impact on a company such as Gateway, which derives more than 50 percent of its revenue from domestic sales, according to analysts. That dependence may have led to what some feel is Gateway's overreaction to one weekend's worth of sales.
``A lot of people are saying, `My God, how could you make that call so early?''' Jeffrey Weitzen, president and chief executive officer of Gateway, said in a speech Thursday. ``We saw data that was clearly alarming over the Thanksgiving weekend and we knew it was important to get that information out early.
``In the fourth quarter last year, we did not have the right product lineup,'' Weitzen said. ``That's not the problem this year. What we're suffering from right now is we're not selling enough units.''
Hewlett-Packard said Thursday that while it expected lower profits next year, it would not be as affected by slow domestic growth because less than 10 percent of its business relies on domestic PC sales.
Adding to computer makers' woes is a feeling that the PC market is saturated and won't pick up again for at least a year.
``Everybody's got a PC,'' Martin Reynolds, an analyst at the Gartner Group, said. ``About 60 percent of homes have a PC and many of those have a second PC.''
Brett Miller, an analyst at AG Edwards, said that unlike past years, when fast new computer chips or feature-packed software programs combined with offers of rebates to fuel PC sales, there is no compelling reason this year for consumers to upgrade.
``There are not applications out there that I can't run on the PC I already have, ``Miller said. ``The PC is getting kind of old in terms of what it does. People are spending money on home networks, PDAs, digital cameras, consumer electronics. There are a lot of things getting people's attention.''
The corporate market has held steady this year, but has lagged mainly because companies bought equipment as early as 1997 in anticipation of disruptions from the Y2K bug.
Corporate sales are expected to pick up late next year as companies upgrade to more powerful machines than can run the new Microsoft operating system, Windows 2000 (news - web sites).
Bad news for computer makers may mean good news for consumers who wait a few months to buy. Slower sales and a desire to reduce inventories may lead companies to cut prices, even before the end of the year.
``Companies don't want to get stuck with inventory after the new year,'' Kay said. ``It ages rather quickly.''
The challenge for computer makers is to enter more markets and expand their offerings to include wireless devices.
Late this year, Compaq introduced its handheld iPaq. And Gateway started selling an Internet device called the Connected Touch Pad, designed to offer easy Internet access from a kitchen counter or anyplace else where bulky personal computers usually are shunned.
``Gateway understands the trend,'' Miller said. ``They know they are too PC-centric. They are moving into consumer appliances, home and business networking. It's just too little, too late.''
-- Tidbit (email@example.com), December 02, 2000