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NPD's industry analysis director Steve Baker called 2003 a key transitional year, with PCs, DVD burners and flat-panel displays helping the IT category turn the corner after several years of mediocre sales, and he expects this trend to continue for the remainder of 2004.
The hottest products driving sales last year were DVD-based devices. The huge increase in DVD burner dollar sales, up 236 percent in 2003, helped fuel an amazing 355 percent increase in blank DVD media, which went from generating $42 million in sales to $188 million in 2003. Meanwhile, portable DVD players and DVD home recorders also notched triple-digit increases.
The computer category not only enjoyed a very good 2003, but Baker said the first half of 2004 was also solid. Notebook computer dollar sales increased 20 percent last year, a very high number for the well-established computer category, on sales of $3.9 billion, with unit sales soaring 32 percent. Desktops did not perform as well, with sales falling 8.6 percent to $3.9 billion, according to NPD's figures. Baker was less optimistic concerning second-half growth, primarily because the category did so well during the 2003 holiday and back-to-school periods that year-over-year comparisons will be tough to improve upon. However, overall he expects notebook dollar sales to increase 20 percent again with desktops experiencing an increase in the teens.
The impact the holidays and back-to-school sales had on the IT segment marked an interesting trend, Baker said.
"The IT business, in a seasonal way, looks more like the CE business. The main difference is IT has a good third-quarter because of back-to-school, which the CE category does not really have," he said.
Flat-panel TVs joined the DVD products by putting up extraordinary growth numbers last year with dollar sales jumping 203 percent to $1.1 billion. Average selling prices fell about $400 to $2,011 for these products. LCD computer monitors faired well in 2003 with retailers selling $1.4 billion in these displays, a 57 percent jump.
Baker said 2004 will see the "sexy" technologies — plasma, LCoS, DLP and LCD — come into their own by the end of the year, while all digital displays "scream out" for integration with other devices. Baker also expressed several uncertainties for the video category, including what impact Dell, Intel and Gateway will have on sales and when pricing will fall to mainstream levels.
The printing category also did well in 2003, according to NPD, but several factors may put a damper on the outlook for 2004. Baker said the inevitable slowdown in multifunction printer growth has begun, and this teamed with pricing concerns for MFPs and inkjet printers could result in weak price trends.
The home storage market looks bright, Baker said. Portable hard drives and network storage are grabbing consumer interest, while the apparent truce entered into by the various formats, primarily through the introduction of dual format drives, is allowing DVD sales to grow.
The home-networking market exploded last year to the point where a critical mass of consumers has been reached with 28 percent of PC-owning homes having a network, with wireless being the dominant type. Baker said vendors can take advantage of this popularity by rolling out entertainment-based networking devices, as this is where consumer interest lays.