Computer sales drop as gadgets lure buyers

Associated Press

LOS ANGELES – 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, Calif.

The stocks of computer manufacturers took a nose dive this week as Gateway, Micron, Hewlett-Packard 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.

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 hand-held computers and personal digital assistants were up more than 100 percent.

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,” said Martin Reynolds, an analyst at the Gartner Group. “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.”