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Sales Of Electronics To Hit Slow Patch, Two Surveys Report

March 14, 2008


CNN Money.com


U.S. consumers aren't in a buying mood for new personal computers and other electronic devices.

A survey by TechnoMetrica Market Intelligence finds that consumer intent to buy new PCs is at its lowest level in at least six years. A separate survey by ChangeWave Research shows slow consumer electronics spending overall.

The impact of these trends is likely to be felt by retailers and electronics companies with a greater share of sales coming from the U.S., such as Dell (DELL), analysts say.

"Concerns about a shaky job market, high fuel prices and the weakening dollar are all spurring consumers to tighten their purse strings," said Constantine Kambanis, technology analyst at TechnoMetrica. "We're seeing it across the board -- from cars to computers."

The IBD/TIPP Home Computer Purchase Outlook index fell 20% in March to 14.3. That reading undercuts the previous low of 15.8 reached in July and September 2004. TechnoMetrica, IBD's polling partner, began surveying consumers on their PC purchase plans in April 2002.

Index scores range from 0 to 100. The higher the number, the higher the expected PC buying activity during the next six months.

The ChangeWave report sees spending on consumer electronics dropping sharply in the next 90 days. Its Feb. 18-25 survey of tech-savvy consumers found that only 19% plan to spend more on consumer electronics in the next three months. And 33% say they'll spend less.

It marks the weakest outlook for electronics spending ever recorded in a ChangeWave survey. The numbers have deteriorated significantly since its last surveys in November and January.

"Consumer electronics spending is taking a huge hit going forward, much greater than that of other spending categories," said Paul Carton, executive research director of ChangeWave.

He predicted that business will be slow at Best Buy (BBY) and Circuit City Stores (CC), the nation's leading consumer electronics retailers.

"When you go over to Best Buy and Circuit City over the next few weeks, you should find wonderful customer service. You'll be surrounded by people willing to help you," Carton said.

The IBD/TIPP PC index reading in March is 24% below the average of the prior 12 months of 18.9.

Just 6% of respondents said they were "very likely" to get a new PC in the next 180 days. That's the poll's lowest number ever, beating the previous low of 8% from January.

Just 19% of respondents said they were very likely or somewhat likely in the next six months to get a PC.

Only 20% of them expect to get their new computer in the next three months. And 77% say they plan to get a new PC in four to six months. The rest aren't sure.

Among likely PC buyers, fewer are looking to Dell. Despite a push into retail stores starting last June with its debut in Wal-Mart (WMT), Dell has lost ground with survey respondents. Dell is the preferred PC brand of 35% of likely buyers, its lowest score ever.

Still, Dell was the No. 1 brand, followed by Apple (AAPL) with 14% of likely buyers and Hewlett-Packard (HPQ) with 13%.

The U.S. consumer PC market might be reaching a saturation point. About 84% of homes have at least one PC and 49% have two or more, TechnoMetrica says.

Dell didn't see a slowdown in U.S. consumer sales in the quarter ended Feb. 1. It saw a 25% rise in unit shipments in the category.

Apple hasn't seen a slowdown in personal computer sales, though iPod sales have cooled, based on the results of its fiscal first quarter ended Dec. 29. Macintosh computer unit sales grew 44% from a year ago. But iPod portable music player sales rose just 5% in units.

HP said its consumer PC sales rose 29% year over year in its fiscal first quarter ended Jan. 31. HP CEO Mark Hurd, in a Feb. 19 conference call with analysts, said he saw more cautious U.S. consumer spending late in the quarter.

But U.S. sales account for only 31% of HP's total sales, and for all of the Americas it was 39%. Dell gets 60% of its revenue from the Americas, and Apple gets 45%.

Originally published in the March 14, 2008 version of Investor's Business Daily.

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