PC Sales Close Year on Down Note

Sales of desktop computers in retail stores and by direct/mail companies declined by approximately 24 percent in December, according to PC Data, the fifth consecutive month of negative comparisons and the second consecutive month of double-digit declines.

In December, retail and direct/mail channels sold slightly more than 1 million desktop PCs. For the year 2000, unit sales of PCs (sold through storefront retailers, direct/mail resellers and Internet resellers) were down 0.8 percent to 10.1 million units, the first annual decline ever reported by PC Data.

“A spike occurred during the week before Christmas, but it fell short of the boost needed to lift overall sales during the Holiday shopping season,” said Stephen Baker, PC Data’s VP of technology products research and analysis. “The sales decline was the convergence of a number of factors, including the success of Internet service provider (ISP) rebate programs in 1999, a slowing economic outlook, slightly higher prices in 2000, and the lack of a compelling upgrade rationale for millions of consumers who purchased PCs over the last two years.”

Retail PC revenue in December fell to $855 million, down almost 30 percent from 1999. In an indication of slowing sales, December retail selling prices fell 7 percent from December 1999 to $846, the lowest monthly average price of the year. December prices were down 3 percent from November and nearly 10 percent from October. For the full year, the average selling price fell only $10, from $916 to $906, reflecting both the slowing impact of sub-$600 computers and the richer configurations PC makers provided during the early part of the year.

For the entire fourth quarter, unit sales were slightly below 2.5 million units, more than 18 percent below the fourth quarter of 1999. Average selling prices fell from $878 to $872 for the quarter.

“Despite these poor PC results, the overall computer products business still looks like a good place to be,” Baker said. “We anticipate that computer retailers will see a 10 to 12 percent increase in revenues for the fourth quarter, driven by the digital upgrade upgrade cycle as consumers shift purchases away from PCs and into the new ‘digital toys’ of the 21st century.”

Sales of handheld devices, including Palm, Visor, and Pocket PC more than doubled in November versus 1999. Other categories showing healthy revenue increases in November over 1999 were MP3 players (400 percent); Web PC cameras (68 percent); CD burners (65 percent); blank CDs (32 percent); digital cameras (26 percent); and mice (15 percent).

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