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NPD, Gartner Don't See Happy PC Holiday

10/09/2006 02:00:00 AM Eastern

Computers may end up being the victims of their own success this holiday season with two industry research firms predicting shoppers will spend their money elsewhere in the coming months.

The NPD Group and Gartner see desktop PCs, and to a lesser extent notebooks, losing sales to flat panel TVs, digital music players and installation services. This switch will not hinder seasonal spending. NPD is forecasting an increase between 6 and 8 percent over the $8.2 billion that was spent between Thanksgiving and Christmas last year.

Setting the stage for this scenario to play out is lower prices for LCD and plasma and the consumer PC replacement cycle running its course combined with the fact that the much hyped convergence between IT and CE products is still not mainstream, said Steve Baker, NPD's industry analysis VP.

“People are still not ready and while the infrastructure is building out it's still not quite there,” he said.

Gartner analysts expect computers will have a tough time competing for the consumer's dollar because LCD TV prices, backed by aggressive marketing plans, will attract more holiday shoppers.

“Even the latest multifunction mobile phones could pose a threat with some buyers considering the prices of these phones and accompanying service contract is increasingly on par with low-end PCs. Vista's absence will definitely make it harder for PC vendors to maintain consumer interest in PCs without cutting prices,” said Gartner's George Shiffler, research director, client platforms research program.

Gateway hopes to take advantage of the LCD TV frenzy by rolling out new dual function displays for use with either TVs or a PC, said John Schindler, consumer products director.

“Our monitor technology is actually better than what regular flat panels offer,” he said.

Lower pricing will help spur some sales in the United States and other developing markets, but these areas are becoming saturated and the lack of a compelling reason, like Vista, to upgrade their PC will limit customer interest.

Even with Vista, Gartner expects PC sales to slow to single-digit growth next year. “Vista's eventual release next year could stimulate some added growth, but we remain skeptical of Vista's impact,” Shiffler said.

Schindler agreed that a post-Vista introduction spike in computer sales will happen in February, but due to the general consumer's lack of knowledge on Vista its absence during the holidays will mostly go unnoticed. However, with its late January introduction there could be a drop off in computer sales earlier that month, he added. This will force vendors and retailers to keep a sharp eye on inventory levels so they are not saddled with left over Windows XP models when Vista ships.

“January will be a challenge. We have to balance our inventory. Starting soon we will look at it weekly and then in November on a daily basis,” said Chris Casper, Toshiba's group manager, product marketing, adding that Toshiba is optimistic about holiday sales.

Also grabbing share from PCs will be Blu-ray and HD DVD players. Their overall impact this year will be limited due to high prices and limited quantities, but Baker still expects retailers to sell out of these products this year. This will set the stage for the market to expand in 2007.

Despite the pull of TVs and music players, several IT categories are expected to flourish this year.

Baker anticipates the two areas that should be on most shopping lists are external storage drives and accessories of all types. He was less positive about networking and printing. Networking is facing the biggest crisis suffering from what Baker called a “bad standards” situation with the on-going development of 802.11n and the fact that most people are content with their 802.11g/a solutions.

Baker expects consumers who pick up a flat panel TV to take more interest this year in the various installation services offered by retailers. Notebook computers will serve the same function on the IT side with consumers needing home networks installed to take advantage of the notebook's mobility. In addition notebook accessories will add to a retailer's bottom line..

absence during the holidays will mostly go unnoticed. However, with its late January introduction there could be a drop off in computer sales earlier that month, he added. This will force vendors and retailers to keep a sharp eye on inventory levels so they are not saddled with left over Windows XP models when Vista ships.

“January will be a challenge. We have to balance our inventory. Starting soon we will look at it weekly and then in November on a daily basis,” said Chris Casper, Toshiba's group manager, product marketing, adding that Toshiba is optimistic about holiday sales.

Also grabbing share from PCs will be Blu-ray and HD DVD players. Their overall impact this year will be limited due to high prices and limited quantities, but Baker still expects retailers to sell out of these products this year. This will set the stage for the market to expand in 2007.

Despite the pull of TVs and music players, several IT categories are expected to flourish this year.

Baker anticipates the two areas that should be on most shopping lists are external storage drives and accessories of all types. He was less positive about networking and printing. Networking is facing the biggest crisis suffering from what Baker called a “bad standards” situation with the on-going development of 802.11n and the fact that most people are content with their 802.11g/a solutions.

Baker expects consumers who pick up a flat panel TV to take more interest this year in the various installation services offered by retailers. Notebook computers will serve the same function on the IT side with consumers needing home networks installed to take advantage of the notebook's mobility. In addition notebook accessories will add to a retailer's bottom line.