PC sales slowdown ends double-digit market growth
Jan. 7, 2001
By JIM BROOKS
Talk of a recession may be premature, but the signs that something happened during the past year in the computer industry and tech stocks was confirmed this week by market researcher PC Data.
According to PC Data's latest report, annual sales of personal computers fell for the first time ever in 2000.
While the drop from 1999 to 2000 was only 1 percent, the fact is significant when you remember that PC annual sales had increased by double-digits the last four or five years straight.
The holiday season was a disaster for PCs, with the month off 24 percent compared to the previous year.
Why the sudden end to the PC boom? Analysts point to a variety of reasons.
The main reason to buy a computer is to take advantage of newer and faster hardware and software. This past year saw advances in both, but not enough to warrant upgrading, a PC Data analyst said.
The average price of a new computer fell to $846, its lowest point for the year in December. Still it wasn't enough to boost holiday sales.
Computer sales were down by nearly 20 percent for the last quarter of the year, PC Data reported.
With sales soft already, analysts say PC prices should begin dropping this month as computer makers try to unload inventory, estimated to be twice the normal level.
Apple Computer already has announced it was cutting prices by as much as one-third on some of its top-of-the-line computers.
SHOW ME THE MONEY. In the wake of the Great Tech Fallout of 2000, dot-com companies are focusing on how to make money in a much more austere environment.
Even Yahoo!, the search engine-turned portal is being forced to look at ways for its sites to generate revenue.
The popular Yahoo auction Web site is the company's first Web site to take this approach by charging listing fees to users who post items on the site for auction.
The fees are the first that analysts expect Yahoo to establish on some of its free services. Yahoo's main source of income has been advertising. The market for online ad revenue has softened since the dot-com shakeup, and analysts say Yahoo's new fees are an attempt to diversity the company's revenue.
Yahoo's auction site now lists about three million items, compared to about 3.7 million listings on eBay.
The fees will range from 20 cents to $2.25 depending on the item. The fees are lower than those already charged by eBay.
The fees could cut listings by as much as half in the short term, analysts say. Most of those customers would probably move to eBay or Amazon.com.
E-COMMERCE GOOD NEWS. While embattled toy e-tailer eToys.com announced it would layoff 700 people by the end of March, there was at least one bright spot among online shopping Web sites.
Toysrus.com, which ran into major problems last year getting items purchased online shipped and delivered on time, reported its holiday sales were up 218 percent from last year.
After last year's fiasco -- which attracted the attention of the U.S. Federal Trade Commission for failing to meeting its promised shipping deadlines -- Toysrus.com wisely began a partnership with Amazon.com.
Toysrus.com and Amazon.com launched their co-branded toy site in September.
The partnership was a wise move, as proven by the amount of traffic the toy site gets directly through Amazon.com.
And Amazon.com reports that more than 99 percent of all of its orders reached their destinations on time.
In fact, the partnership has been so successful that Toysrus.com plans to expand the partnership with at the addition of a baby products-specific Web site called Babysrus.com.
DOT COM BOMBS. A new survey shows that at least 210 Internet companies closed their doors last year, amounting to the loss of more than $1.5 billion in investment funds.
More than half of those closures came in the fourth quarter of last year, according to the survey by Webmergers.com.
Most of the closed companies were e-commerce businesses. Online content sites accounted for 30 of the total, while the rest were service and infrastructure companies.
The closures represent as many as 15,000 workers who lost jobs -- a figure that doesn't include layoffs of companies that are still in business.
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