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Portable, Component Audio Switch Roles

Arlington, Va. – Factory-level sales of portable audio hit a wall in September and the third quarter overall, but sales of home audio components surged during both periods in a role reversal that component suppliers hope will continue, CEA statistics show.

Portable-audio sales slipped by 4.1 percent in September to $437.7 million, and by 1.3 percent in the third quarter to $1.17 billion. Meanwhile component audio sales surged 121.5 percent for the month to $118.7 million and 39.2 percent for the quarter to $293.3 million.

All told, combined sales of home, portable and car audio rose 0.7 percent to $863.9 million for the month, slipped 1.3 percent to $2.23 billion for the quarter, but rose 9.9 percent to $6.92 billion for the year to date, CEA’s statistics show.

This year’s component surge, coupled with declining home audio system sales, could cause full-year component sales to exceed full-year home-system sales for the first time in 10 years if trends continue, based on seasonally adjusted annualized selling rates through September.

Remarkably, the component segment was the only audio segment to grow in September and the quarter, underscoring a remarkable turnaround for a segment that shrank in nine of the previous 10 years and fell a jaw-dropping 20.3 percent in 2005.

Home audio, nonetheless, has a long way to go before challenging portable’s dominance. Year-to-date portable sales exceeded home-component sales by 4.7 times and exceeded total home audio sales (components and systems combined) by 2.4 times.

Here’s how each industry segment fared for the month, quarter, and year-to-date:

Home components: September’s 121.5 percent gain to $118.7 million was the segment’s second-highest quarterly percentage gain in the 15 years for which statistics are available in the TWICE database. The segment’s highest quarterly gain since 1991 occurred in 2004’s second quarter, when sales surged 34.4 percent.

This year, sales have risen every month but March, lifting third-quarter sales by 39.2 percent to $293.3 million and year-to-date sales by 18.9 percent to $812.8 million. On an annualized seasonally adjusted basis, 2006 component sales are on track to hit $1.18 billion, but even at that level, sales will be only slightly ahead of 2004’s $1.14 billion.

Portable audio: The iPod-driven segment shrank 4.1 percent in September to $437.7 million and slipped 1.3 percent for the third quarter to $1.17 billion, but year-to-date sales were up 26.1 percent to $3.8 billion.

Falling third-quarter sales interrupted eight consecutive quarters of growth and marked a dramatic reversal from the 52.3 percent and 35.5 percent gains posted in the first and second quarters, respectively.

Although portables hit a wall in the third quarter, the segment is on track on an annualized seasonally adjusted basis to hit a record high of $5.96 billion, up from the previous year’s record $5.28 billion.

The vast majority of portable sales consist of Apple iPods, but sales also include other-brand MP3 players, headphone CD players, headphone cassette players, boomboxes, and tabletop radios. In 2005, iPods and other-brand MP3 players accounted for about 85 percent of portable audio dollar volume, CEA statistics show.

Aftermarket autosound: Sales dipped for the month, quarter, and year-to-date and would be far worse if CEA didn’t include all satellite-radio tuners in the segment, including plug-and-play tuners that can be used in the home and car.

Sales were off 7.4 percent in September to $175.4 million, by 10.3 percent for the quarter to $449.3 million, and by 10.8 percent for the year-to-date to $1.49 billion.

Autosound sales fell in seven of the nine months reported so far this year.

Home audio systems: Sales of stereo and home-theater-in-a-box (HTiB) systems dipped by 16.6 percent in September to $132.1 million, by 12.3 percent in the third quarter to $323.2 million, and by 12.1 percent for the full nine months to $812.9 million.

In the third quarter, systems outsold components by $323.2 million to $293.3 million, but for the first nine months of the year, sales in the two segments were almost identical at $812.8 million for home components and $812.9 million for home systems.

On an annualized seasonally adjusted basis, 2006 component sales are on track to hit $1.18 billion based on year-to-date sales, almost dead even with projected system sales of $1.19 billion.