Technologizer posts about Economy

Analyst Predicts Rise in PC Sales

By  |  Posted at 2:40 pm on Friday, September 18, 2009

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IDG is reporting that sales of PC desktops and laptops are rising ahead of Windows 7′s October 22 launch date. The strong demand is unexpected, analysts said.

PC sales in July and August caught Manish Nigam, director of technology research in Asia for Credit Suisse, off guard, IDG is reporting. Credit Suisse had held the expectation that consumers would hold off purchasing new equipment until after Windows 7 ships.

Microsoft’s pre-sale marketing campaign, where it offered customers discounted upgrades for a limited time, appears to have been successful. But I question whether enthusiasm for Windows 7 PCs will be sustained after its launch, or if those early adopters were just being extremely cost-conscious.

In March, Gartner predicted a significant drop in PC sales for the year, noted the rise in popularity of low-cost netbooks, and said that PC users were extending the lifetimes of their equipment. Windows 7 will be a sales boon for Microsoft, but it might lack the potency of previous Windows releases.


Microsoft’s Netbook Problem

By  |  Posted at 2:15 pm on Friday, July 24, 2009


The persisting popularity of netbooks has been a major drain on Microsoft’s Windows client licensing revenue. The worldwide economic downturn has driven many people to purchase cheaper machines, but I believe that the netbook’s ascension also reflects changing consumer tastes.

Windows client licensing revenue fell $1 billion from last year, and Microsoft’s unearned revenue from multi-year license agreements has flatlined.

Unless Windows 7 proves wildly popular, the company’s prospects for restoring its Windows business to its past luster appear to be grim. I expect that the company will experience a cyclical earnings bump that will crest near where previous Windows releases have in the past, but growth will be less substantial.

That is because there are simply too many alternatives, with the Web acting as the great equalizer. I access Gmail just as quickly on a netbook running Linux as I would on a higher end laptop powered by Windows. And even though netbook hardware is wimpy by current standards, netbooks are as powerful as high-end machines were on the not-too-distant past

Not everyone is a developer or a gamer. I believe that the netbook meets the “good enough’ threshold for most people, and there is a decent assortment to choose from on the market.

Many of those people may have been compelled to purchase a netbook by financial reasons, but it is highly possible that many will be satisfied enough  to purchase another netbook in the future. It could mean a permanent change in consumer buying behavior.

Microsoft seems to understand that, because it is downplaying netbooks at every chance it can get, and is attempting to direct customers toward more expensive alternatives. But the industry has failed to create really compelling products that would “wow’ me into paying more–so far.

I am reminded of my late grandmother, who was a child of the Great Depression. She wouldn’t spend money needlessly, and would reuse what she had (including tinfoil). People are experiencing varying degrees of hardship during this recession, and it is not unreasonable to expect that their spending habits will be permanently altered.

Consequently, if Microsoft does not see its market share slide, it will see its revenues fall. It cannot charge as much for a copy of Windows on a $400 machine than it would have traditionally done on more expensive systems. The Windows cash cow is slowly beginning to dry up.

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Recession Slams PC Industry, Shipments Shrink

By  |  Posted at 10:43 am on Wednesday, July 15, 2009

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hpcheapPC shipments are set to decline for the first time since 2001, iSuppli said Tuesday. The call reverses an earlier one which had said the industry would be able to eke out a small gain for the year. In any case, it appears that the severe recession is at fault for the pullback.

A four percent decline is expected in PC shipments worldwide year over year to 287.4 million units. However, the drop would only be temporary as shipments are expected to grow 4.7 percent in 2010.

Desktops appear to be the industry’s weakest spot. Year over year, shipments plummeted 23 percent in the first quarter. iSuppli expects a similar number for the second quarter when figures are compiled in the next few weeks.

Notebooks are helping to buoy shipments. Shipments there will climb nearly 12 percent to 155.9 million units this year. That would be enough to give portables a majority market share for the first time.

This isn’t all that surprising considering notebooks have been growing in popularity rather quickly for several years now. It seems that consumers are increasingly choosing mobility over power — as a general rule, desktops are more powerful PCs (for cheaper) than the notebook.

Either way, iSuppli’s findings shouldn’t surprise any of us. In a economy like this, we’re more worried about the necessities in life. While many of us are addicted to the Internet these days, a shiny new computer is not that necessary to surf the web with.


Apple May Be Immune to Economy, But Stores Aren’t

By  |  Posted at 12:20 pm on Friday, April 24, 2009


applestoreApple certainly made it through this past quarter in great shape. Nobody is complaining about the company’s results, which by all accounts were stellar. However, Cupertino does have a retail arm, and like any other it’s beginning to struggle.

Average revenue per store is down 17 percent – falling from $7.1 million in the year ago quarter to $5.9 million. It could be argued that the only reason overall sales numbers were up slightly (1 percent) was the fact that 46 new locations have been added since then.

(Imagine the Wall Street carnage if Apple hadn’t opened a single store — eek.)

Thus, the company’s gotta do what its gotta do. That means layoffs — 1,600 full time employees will be cut across its 250+ stores. That would amount to about 10% off its current total workforce of around 15,600.

One thing is for sure however: the frantic pace at which Apple had been opening new retail locations appears to be a thing of the past. Sign of the times, ain’t?

More about Apple’s plans can be found in this SEC filing.

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A Bad Quarter for Microsoft. But Not Necessarily a Sea Change.

By  |  Posted at 6:09 pm on Thursday, April 23, 2009


Today, Microsoft’s released its third quarter financial reports, and for the first time, saw a decline in its year-to-year quarterly results.

The company reported that its quarterly revenues were $13.65 billion, approximately 6 percent lower than they were this time last year. That missed Thomson Reuters’ sales forecast of $14.09 billion. Its net income was $2.98 billion, earning shareholders 33 cents per share.

In its filings, Microsoft noted that its earnings per share would have amounted to 39 cents if it were not for one time charges for employee severance costs and investment impairments. That figure would have met analysts’ estimates, according to reports.

I would be hesitant to say that Microsoft’s slumping performance is indicative of any type of sea change happening in the industry. Yes, by the company’s own omission, Windows client license revenues are down, but that does not mean that netbooks loaded with Linux are going to permanently displace Windows.

It is simply too soon to begin speaking about any long term trends taking hold, and there are too many variables. Despite its lowered earnings and occasional missteps, Microsoft remains in a competitive position in a number of product categories–without having ever accrued any long term debt. It is a strong company that is making operational and structural changes to adapt to the economic environment.

PC sales will spike this fall when Microsoft releases Windows 7 in October (unless it turns out to be January). I’m prepared to be underwhelmed due to fallout from the worldwide economic downturn, but when things begin to turn around, many people are going to want to buy new PCs loaded with Windows 7 and Office 14.


Sony Drops PS2 Price to Under a Hundred Bucks

By  |  Posted at 8:39 pm on Tuesday, March 31, 2009

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PlayStation2Responding to the unfavorable economic environment, Sony is slashing the price of its PlayStation 2 gaming console to under $100. The price cut is also aimed at luring new gamers to the venerable platform, extending the PS2′s life cycle for the foreseeable future.

Aside from competing on price, the PS2 has a solid library of games and thriving aftermarket of accessories and used games. If I were a parent choosing between a PS2 and PS3, I’d opt for the lower-cost alternative, because it’s good enough.

When my grandfather was a child during the Great Depression, he received hand-me-down clothes to wear from his older brothers. When his shoes did not fit, he wadded them full of paper. Kids today can wait a few years, or mow some lawns to buy themselves a PS3.

I’d also make a bet that PS2 owners that have upgraded to PS3 still play some of their old games, because there are some great titles. Simple platforms such as Nintendo’s DS and the iPhone sell games, because the games are good. The latest and greatest isn’t always what people want to buy.

It’s great the Sony is capitalizing on its asset rather than abandoning a still lucrative platform. It’s good business, and it’s a great value for customers. That, and an excuse for me to tell curmudgeonly tales.

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The Last Will and Testament of Circuit City

The even later, even more tragic last days of a one-time retailing giant.

By  |  Posted at 10:28 pm on Saturday, March 7, 2009


Last Will and Testament of Circuit CityFor Circuit City, it passed for good news: On Friday, a press release trumpeted the “record shopper turnout” at the failed retailer’s going-out-of-business sale and said that the liquidation proceedings were ahead of schedule. All U.S. stores are therefore closing forever as of tomorrow. And so I made what will almost certainly be my last visit ever to my local Circuit City today, six days after I found it had been reduced to selling used cleaning supplies.  Back on Monday, it still stocked some factory-fresh consumer electronics products, too–albeit at discounts too low to send anyone into a shopping frenzy. Today, with 24 hours to go, very little worth buying at any price was still available…

After the jump, a final set of fuzzy iPhone photos from the scene of the sale. I wonder how long it’ll take the landlord to fill the space, and what will replace Circuit City there–and in the 566 other storefronts that the chain’s failure leaves without a tenant?

Continue reading this story…

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The Tragic Last Days of Circuit City

By  |  Posted at 10:39 pm on Monday, March 2, 2009


The Tragic Last Days of Circuit CityLiquidation: It’s an ugly word for the ugly process of shutting down a retailer by selling off stuff little by little until there’s nothing left that anyone’s going to buy at any price. And my most recent visit to my local branch of the soon-to-be-defunct Circuit City in the Bay Area was…ugly. Literally. The place, which says it’s down to its final week of business, was in gloomy disarray–one part rummage sale, one part junk closet, and barely recognizable as the splashy consumer-electronics merchant that has been around for sixty years. And the bargains still weren’t exciting enough to attract more than a trickle of shoppers. After the jump, a bunch of photos I snapped with my iPhone.

Continue reading this story…

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Gartner Predicts Significant Drop in PC Sales

By  |  Posted at 3:57 pm on Monday, March 2, 2009


A new research note from analyst firm Garner predicts that the PC industry will “suffer its sharpest unit decline in history” in 2009. Gartner predicts a nearly 12% reduction in sales from 2009, but noted that many PC makers are and their suppliers are equipped to adapt to the changing reality of the market.

“The PC industry is facing extraordinary conditions as the global economy continues to weaken, users stretch PC lifetimes and PC suppliers grow increasingly cautious,” said George Shiffler, research director at Gartner. Sales in both emerging and mature markets will both decline at steep rates,10.4 percent and 13 percent respectively, according to the report.

The Gartner report is not so much a “Debbie Downer: as it is a reflection of today’s economic reality. Consumers and businesses are just spending less. And it’s not surprising to see them stretch out the useful life of the computers they already own.

Worldwide mobile PC shipments are expected to reach 155.6 million units, a 9 percent increase from 2008. Desktop PC shipments are forecast to total 101.4 million units, a 31.9 percent decline from 2008. Mobile PC growth will be substantially boosted by continued growth in mini-notebook shipments; excluding mini-notebooks, other mobile PC shipments will grow just 2.7 percent in 2009.

Desktop PC sales are forecast for a marked 31.9% decline; whereas, mobile PC sales are expected to increase nearly 10% from 2008. The report credits the burgeoning popularity of netbooks–low cost mobile PCs–for the growth. Netbooks are cushioning sales, but remain too few to offset the collapse of the desktop PC market, the report noted.

Regardless, PC makers have learned their lessons from 2001, when the market contracted just 3.2%, Gartner says. “Razor thin margins and the lessons learned in 2001 have schooled PC vendors and channels in the necessity to invest in their supply chains. These investments have given them much better visibility of demand, even though products are largely being built in Asia by third parties and therefore have long lead times.”

The PC market is far from collapsing, and the availability of Windows 7 later this year (unless it’s January) will likely boost sales. Back-to-school and holiday sales likely won’t be as robust as they would during normal economic times, but there are still a lot of PCs that will be sold this year, and there will not be a dust bowl in Silicon Valley.

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Nokia Cuts R&D, Production

By  |  Posted at 5:45 pm on Wednesday, February 11, 2009

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Singing the macro-economic woes, Finnish telecommuncations giant Nokia has decided to cut production and to close one of its R&D sites. Ultimately, the company has failed to capitalize on the strength of the smartphone market.

Nokia is reducing production at its plant in Salo, Finland, and has begun to phase in furlough days that will affect 20 to 30% of the plant’s 2,500 employees, on a rotational basis. The company is also shuttering its facility in Jyvaskyla, Finland, costing 320 people their jobs.

Nokia told investors in January that it expects cell phone demand to fall 10 percent in 2009. However, it managed to increase its share of the worldwide mobile market in 2008 even while demand was weakened by lowered consumer confidence, according to a September 5 report by Nordic Business Report. It experienced a 69 percent drop in its 2008 fourth-quarter net profit.

In many markets, Nokia’s sales grew–it’s the U.S. market that has remained its albatross. RCR Wireless News reported in July that Nokia claimed 40% of the market in 2008, and its sales were particularly strong in the Asia-Pacific region, Latin America, and Middle East.

The company is relying upon high-end smartphones to help them cope with economic crisis, the Wall Street Journal reported in a December interview with Jonas Geust, vice president of Nokia Nseries unit. The smart phone market is growing, but Nokia is not a benefiting much. It is losing out to fierce competition from Apple and Research In Motion.

It seems counterintuitive for Nokia to cut its expenses when its most advanced devices are failing to sell. The 5800 XpressMusic, Nokia’s initial answer to the iPhone, lacked multitouch capabilities. That should have been an indication that it needed to invest more, not less. I don’t see how a move away from innovation is good for customers.

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Twitter May Begin Charging for Commercial Accounts

By  |  Posted at 4:56 pm on Tuesday, February 10, 2009


Twitter logoTwitter may yet prove that it is more than the gilded plaything of venture capitalists , and a productivity killer for those of us who tweet while we should be working. In an interview with UK-based Marketing newspaper, co-founder Biz Stone said that the company was identifying ways to charge for commercial accounts.

Stone told Marketing, “We are noticing more companies using Twitter and individuals following them. We can identify ways to make this experience even more valuable and charge for commercial accounts,” without specifying how much the company would charge. In a Twitter blog post today, he stressed that the company isn’t ready to make any announcements about how it’ll make money. But he did say “we hope to begin iterating on revenue products this year,” which is Silicon Valleyspeak for “Sooner or later we’re gonna need to make some money.”

An actual revenue model –fancy that. Twitter’s popularity has exploded, but there has not been so much as a single advertisement served up on its Web site. Since it is unlikely that anyone will pony up another $500 million offer to buy it out anytime soon (as Facebook is rumored to have done), it’s time for Twitter to face up to the reality of 2009 and earn some money.

Since its inception, venture capitalists Bezos Expeditions, Digital Garage, Spark Capital, and Union Square Ventures have showered a combined $20 million in private equity on Stone and crew. Meanwhile, Twitter hasnever publicly explained (or demonstrated) how it would turn a profit.

Now that it has an established user base, it makes perfect sense for Twitter to leverage the direct access that it has afforded brands to their customers. Twitter has the opportunity to create several products that could keep the failwhale at bay, and to keep its employees’ lights on.


Apple Store Traffic Flat, But Sales Are Down

By  |  Posted at 9:11 am on Monday, February 2, 2009


applestoreApple has taken quite a bit of pride in its successful retail operation, and rightly so. It has grown at a rate not seen by other electronics outlets as of late, and sales have been consistently higher every quarter.

Not so for the holidays. Traffic was essentially flat in the fourth quarter, down 1.8 percent. The real drop was in sales, falling 17.4 percent and showing that consumers are buying less, Needham analyst Charlie Wolf found.

“Consumers aren’t in a spending mood,” he quipped to Barron’s (subscription only).

Barron’s Mark Veverka also makes an astitute observation: Apple’s struggles at retail could reverberate. Malls will feel the difference as these stores have become attractions, bringing in new consumers that may have otherwise not shopped the mall.

Another effect is as Apple sells less, it produces less. This sends shockwaves backward into its whole supply chain. Companies that have produced iPod parts know this all too well: an adjustment in Apple’s ordering can cause them to completely miss their own financial goals (it’s happened).

While its certainly alarming to shareholders that one of Apple’s primary revenue drivers are falling upon hard times, consider this: Apple can afford some loss at retail.

As Doug McIntyre at BloggingStocks put it, these stores serve almost as a showroom of sorts for the company: “As long as Apple’s revenues are improving, there is hardly reason to complain,” he argues. I can’t argue with that.

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Make it Stop — More Tech Jobs Slashed

By  |  Posted at 11:24 am on Thursday, January 29, 2009

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Since my last post mid-month, we’ve seen some acceleration in tech layoffs, and the overall jobs picture continues to look poor. Another 588,000 applied for initial unemployment benefits overall this week, which was worse than experts had forecast. The continuing rise of unemployment claims indicates the recession continues to intensify, and we’ll get a solid picture Friday when gross domestic product (GDP) numbers are released. So, who’s on the chopping block this week? Time Warner has announced it would cut 700 jobs, which would be about 10 percent of its workforce. SAP will be taking a similar route, cutting about 6 percent of its workforce during the year, which would amount to about 6,000 jobs. Sprint Nextel has the deepest cuts that we’ve seen: about 8,000 jobs or 14 percent of its workforce. With the deterioration of the financial position of the consumer, and confidence continuing to fall — there still appears to be no clear end in sight to the downturn, which means companies will continue to layoff at alarming rates well into 2009.


Yahoo Releases Fourth Quarter Financial Results

By  |  Posted at 4:14 pm on Tuesday, January 27, 2009


YahooToday, Yahoo shared its fourth quarter financial results with investors, the first financial news it’s had since naming Carol Bartz as CEO. While revenue was relatively flat compared to 2007, Yahoo experienced a net loss of $303 million, compared to a net income of $206 million in 2008, due in part to strategic decisions that obliterated shareholder wealth.

According to the company, operating income was goggled up by a sundry of expenses before the customary subtraction of interest, tax and depreciation:

“restructuring charges of $108 million for severance, facilities, and other restructuring costs; a goodwill impairment charge of $488 million related to our international segment; and incremental costs of $7 million incurred for outside advisors related to Microsoft’s proposals to acquire all or a part of the Company, other strategic alternatives, including the Google agreement, the proxy contest, and related litigation defense (collectively, the “strategic alternatives and related matters”)”.

CFO Blake Jorgensen said that cost management and a Yahoo’s “strong balance sheet” helped it navigate 2008′s financial turmoil, and said that the company was well positioned for more challenging economic conditions. Blake probably wishes that he was on on a beach in Aruba sipping piña coladas instead of offering guidance to investors.

Bartz, meanwhile, told those listening in to Yahoo’s conference call that she didn’t take her new gig to sell the company. But she seemed to tippy-toe around questions of whether part of Yahoo, such as its search business, could be up for sale.

Yahoo made the mistake of turning down Microsoft’s $44.6 billion takeover bid, and now, those who remain have to drink from a muddy well.


Has Microsoft Flight Simulator Been Canceled after 29 Years?

By  |  Posted at 9:19 am on Friday, January 23, 2009


Microsoft Flight SimulatorReports this morning have it that Microsoft’s venerable Flight Simulator game may be realistically simulating the fate of Pan Am, Eastern, and TWA: Supposedly the Microsoft layoffs announced yesterday include the program’s entire development team, and it’s therefore being discontinued. I hope it’s a false alarm. I’ve never sat inside FS’s cockpit even once, but I feel like it’s been part of my life for almost as long as I’ve been using personal computers (that would be 31 years as of this summer).

Continue reading this story…

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What Does Microsoft’s Bad News Day Means For the Future of Windows?

By  |  Posted at 8:27 am on Thursday, January 22, 2009


MicrosoftQuarterly financial results are in from Microsoft, and they’re pretty ugly: The company’s revenue fell short of guidance by $900 million, and net income was down by 11 percent. In reaction to these numbers and general economic gloom, the company says it’s eliminating 1400 jobs today and a total of 5000 positions over the next 18 months (while hiring in some areas where the company sees growth or opportunity). At least that headcount cut is less severe than the worst rumors would have had it.

The sentence in the announcement with the most profound long-term implications for the company is this one: “Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks.” Translation: Windows Vista sold poorly during the quarter, and it did so in part because folks were buying low-cost computers that didn’t run it. Vista has been a poor fit for notebooks for two reasons–it’s too resource-hungry to run well on many of them, and it costs PC manufacturers too much. End result: Many netbooks run Windows XP or Linux.

The country’s economic mood at the moment is so miserable that it’s difficult to extrapolate what current news might mean for the future. (In fact, Microsoft announced today that it’s not giving guidance on its likely results for the rest of the year.) So it would be dangerous to assume that disappointing sales for Windows in one quarter means that the OS is entering an era of decline.But it’s fascinating to see Microsoft’s money machine break down. And if a meaningful percentage of PCs are going to cost so little from now on that Windows will be an unaffordable luxury, it means that the financial model that made Microsoft a monopolistic monolith could crumble in the years to come.

Sluggish Vista sales show just how important it is to Microsoft that Windows 7 be a reasonable operating system for netbooks. That definitely means that it must run respectably on PCs that sport low-end CPUs and skimpy amounts of RAM. But it may also force Microsoft to charge PC manufacturers less for the OS, in hopes of preventing them from opting out of Windows altogether. (I was in a Target recently that had two Asus Eee PCs for sale side-by-side: A $300 Linux model and a $350 Windows one. I’d love to know what the sales breakdown is…)

Anyone out there care to guess where Windows will be, say, three years from now? It ain’t going to disappear, and if Microsoft is fast enough on its feet it might be doing okay. But it’s possible, at least, that the planet will be noticeably less Windows-centric come 2012…

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