Technologizer posts about Economy

Apple Quarterly Sales Results: What Depression?

By  |  Posted at 3:12 pm on Wednesday, January 21, 2009

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Apple LogoI’m not a financial analyst, so I hesitate to do anything that smacks of analyzing finances. But Apple just released its financial results for its first fiscal quarter and hosted a conference call to discuss them, and the news seems mostly good, especially given the dire condition of the economy. The company reported record quarterly revenue and profit, and also revealed the following:

Macs: 2.5 million Macs were sold in the quarter, representing 9 percent growth. 71% of them were notebooks; desktop sales, not surprisingly, are down. Macs sold Apple pointed out that an IDC study says that the overall PC market shrunk during the quartert.

iPods: The company sold 22.7 million iPods, representing 3 percent growth. The players have 70 percent market share. iPod revenue, however, was down.

iPhones: 4.4 million  handsets were sold in the quarter. 13.7 million were sold in calendar 2008–above the company’s once-daunting 10 million goal.

Apple Stores: The company’s 251 stores in 10 countries sold $1.7 billion of stuff in the quarter, including 515,o000 Macs–”almost half to new owners.” But per-store sales were down because of the touch economy and discounts and deals offered by third-party sellers of Apple products.

A few tidbits based on questions asked by financial analysts who were in on the call–the quotes below are from Apple COO Tim Cook and CFO Peter Oppenheimer:

How’s Steve Jobs? How will Apple fare without him? “Steve is the CEO of Apple, and plans to remain involved in major strategic decisions, and Tim will be responsible for day-to-day operations.” There’s an “extraordinary breadth and tenure of senior Apple executives,” and they lead a team of “wicked-smart” employees. “The values of our company are extremely well-entrenched…We’re on the earth to make good products, and that’s not changing…We believe in saying no to thousands of products…I strongly believe that Apple is doing the best work in its history.”

Will Apple continue to open new Apple Stores given the economic climate? Yes. 25 new stores in FY09, half outside the U.S.

Would Apple sell more iPhones if they cost less? “$199 with contract is compelling…we see nothing else close to it…we’re years ahead of the competition.” Apple isn’t interested in selling cheap, basic phones.

Netbooks: They represent only 3 percent of PC sales. “It’s a category we watch, but right now we think the products there are inferior, and won’t provide an experience to consumers that they will be happy with.”

Apple TV: Sales are up by a factor of three, but it’s still “a hobby” that the company is investing in because it thinks there’s something there long-term.

Snow Leopard, the next version of OS X: They’re excited about it, but no comment beyond that, and no timetable for its release.

The sale of iPhones in Wal-Mart stores: Wal-Mart’s outlets “reach a tremendous amount more people than we could reach in our stores” in areas of the country with no Apple Stores.

iPhone competitors: Most aren’t for sale yet, so it’s hard to judge them. It’s tough for developers to build for platforms which involve devices with different size screens and other variances in features. “We’re very, very comfortable with where we are competitively…we like competition, as long as they don’t rip off our [intellectual property]…and if they do, we’ll go after them.”

Does the Palm Pre’s multi-touch screen violate Apple patents? “I don’t want to talk about any one company…but we will not stand for having our IP ripped off and will use whatever weapons are at our disposal. I don’t know how much clearer I could be than that.”

Apple’s market share: The company had 16 percent unit share, 32 percent revenue share in U.S. retail in the quarter. “I think those are fantastic results, and we’re extremely proud of them.”

What percentage of the 500,000 apps downloaded from the App store were free versus paid? The company isn’t disclosing that.

Others who know way more about crunching numbers will analyze these numbers in depth, and likely poke holes in Apple’s upbeat spin. (Silicon Alley Insider is already saying that iPhone sales were disappointing.) But Apple sold scads of products and made financial progress on multiple fronts in a quarter during which much of Silicon Valley was busy reporting dismal numbers, scaling back ambitions, and laying off employees. It may not live in a reality-distortion field of its own, but its contrarian instincts still seem to be serving it well.



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Circuit City Under Siege

The dying retailer's liquidation sale has long lines of curious shoppers and few bargains of note so far.

By  |  Posted at 9:55 pm on Sunday, January 18, 2009

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Circuit CityThey’re the grim reapers of failing retail chains, except they brandish going-out-of-business signs instead of scythes. And they were surrounding the Circuit City a couple of miles from my house today, which, like the rest of the company’s 500+ U.S. stores, is liqidating its stock as the company goes out of business. When I drove up to the store, I was startled to find a long line of customers waiting to get in, snaking all the way to the Sports Authority next door–maybe the longest such line I’ve ever seen that wasn’t at a store with a fresh batch of iPhones or Wiis. (I sure never saw lines like it when CompUSA, Good Guys, and other defunct chains held their liquidation sales–but perhaps today’s economic climate is leaving shoppers obsessed with finding bargains.)

I joined the line, and got the impression that other folks had joined it in part because they saw a line and figured it was worth joining. (Or at least the woman behind me seemed unclear on the concept–she asked what was going on in the store, and why were were all queuing up.)

A CNet reporter said he found “pandemonium” inside a Southern California Circuit City; this one, just to the south of San Francisco, was relatively sedate inside. Actually, there were fewer people in line to buy stuff than I usually see at Best Buy on a Saturday afternoon. The store felt downright lonely, in part because it was full of staffers who knew they were about to be unemployed, tables of open-box merchandise, items scattered in the aisles, and TVs forlornly playing a video loop arguing that you should buy a TV from Circuit City because of its great post-purchase service.

It was easy to tell why so few people were filling their carts with gear: The deals to be had were far from spectacular. The signs outside promised “Up to 30% OFF,” but a more direct claim would have been something along the lines of “Most hardware 10 percent off, software 20 percent off, and good luck if you find anything in the store that’s 30 percent off.” If your goal was to get the best possible price, you could probably beat even Circuit City’s liquidation prices without trying very hard by going online. Which is presumably one reason why Circuit City was forced into bankruptcy in the first place.

If Circuit City’s liquidation follows the usual pattern, the discounts will get larger as the shelves grow barer, and within a few weeks the stores will be left with items that you don’t want to buy even at 80 percent off. After the jump, some bad iPhone photos from my visit, which left me melancholy about the death of the 60-year-old merchant even though I was never a big fan in the first place.

Continue reading this story…



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Tech Layoffs Are Picking Up Speed

By  |  Posted at 9:12 pm on Friday, January 16, 2009

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Folks, I have to say the rate at which these layoffs are coming lately is beginning to seriously worry me a little. While we focus here on technology, forgive me a moment while I stray a bit. Across the economy layoffs — as pointed out by this CNBC article — have increased dramatically after the New Year.

The reasoning? After a holiday season that was more about denial of our economic situation rather than facing reality, companies are looking at their balance sheets and realizing what bad shape the US economy is in.  So the first reaction is to cut costs, and that nearly always means layoffs.

You have probably already read David’s reporting on AMD’s latest round of cuts, and Harry’s take on the end of Circuit City. But it goes beyond this.

Motorola? They’ll be cutting another 4,000 jobs due to weak handset sales. Autodesk’s balance sheet is deteriorating, so it has decided to cut its workforce by 10 percent, which leaves about 750 without a job.

Seagate is set to lay off 2,950, which would be 6 percent of its workforce. Worse yet, some employees will see their salaries cut by as much as a quarter. Oracle and Lexmark are both cutting 250 apiece, and I’m sure we’ve only just begun. Sad to think we’re only 15 days into 2009, and its already this bad.

What’s more worrisome is that when stuff like this happens, spending on advertising also drops. Take for example Federated Media, Technologizer’s ad partner. The company announced that it’s laying off staffers who were focused on traditional display advertising in order to focus on more “conversational” social-media marketing initiatives. The weak market for display ads inevitably means less ads on at least some of the tech sites that are dependent on them for revenue.

What does that mean for those publications? Obviously, they’ll start letting go of writers. It’s just like dominoes.

This recession is by no means over: we aren’t even to the worst part yet. President-elect Obama is going to inherit one hell of a mess, that’s for sure.



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AMD Cuts Employees, Compensation

By  |  Posted at 2:36 pm on Friday, January 16, 2009

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amdlogoDeflation is rearing its head in the chip-making business. Advanced Micro Devices intends to reduce its workforce by nearly 9 percent and will reduce employee compensation during its first quarter.

Even its top executives are taking a hit to their base salaries (no word about their bonuses); the rank and file will see their incomes drop on a staggered basis depending on their employment status. Other perks, including the company’s 401(k) matching program are being suspended indefinitely.

AMD must take difficult and prudent steps to reduce its cost in response to the worldwide economic downturn, it explained in a statement to the press.

This should come as no surprise considering there has been a corresponding downturn in the sales of semiconductors. Chip sales dipped to $20.8 billion in 2008 from $23.1 billion in 2007, according to a recent report by the Semiconductor Industry Association. Public companies like AMD are going to respond to reduced demand by cutting expenses, because they have to act in the interest of shareholders.

The company is not selling the copper plumbing–yet. While its sales have dipped, it still remains second largest semiconductor producer in the world next to Intel, and it has laid out long term road maps for future technologies. Further, new chips designed for low-cost computers, such as its Neo processor, could entice spendthrift consumers to open up their wallets.

Should PC buyers worry about AMD’s prospects or even shy away from buying machines that use its chip? Not really. Companies  that big don’t just close up shop overnight, and AMD is also highly unlikely to skimp on its manufacturing processes or R&D, lest it risk damaging its brand or ceding even more market share to Intel. Customers can buy AMD-based systems with confidence.



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Circuit City Closes Up Shop Once and For All

By  |  Posted at 10:11 am on Friday, January 16, 2009

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Circuit CityIt’s hardly surprising, but now it’s official: Troubled consumer-electronics merchant Circuit City has failed to find a buyer and will therefore be liquidating all its stores. It’s lousy news for its more than 30,000 employees, its stockholders, and anyone who was a fan of the chain, which started with a single store six decades ago.

Even if the U.S. economy was in better shape, the odds were against the company–and, for that matter, anyone else who tries to operate a big chain of electronics stores. Far more of them have folded over the years than have ever been viable businesses. Running successful retail stores is by definition really hard, and the intense price competition among gadget sellers makes squeezing out a profit incredibly tough.

Even so, Circuit City’s death strikes me as largely self-inflicted: For too long, its stores were joyless places with limited selections, uncompetitive prices, and mediocre customer service. It even had an organized program to fire staffers who were experienced enough to know what they were doing and replace them with clueless, low-clost newbies.

With Circuit City’s imminent disappearance, the country is really left with only one nationwide full-service electronics chain, Best Buy. It’s long played Gallant to Circuit City’s Goofus, and should ride out the recession in decent shape. Other electronics purveyors are specialists (RadioShack), generalists with an electronics department (Wal-Mart, Target), regional (Fry’s, the current incarnation of CompUSA), or willfully limited in number of locations (Micro Center). Or, of course, completely virtual (Amazon.com, Buy.com, etc., etc., etc.).

Among the reasons I wish that Circuit City had made it is this: It would be a lot better for consumers if there were at least two strong national chains competing to win customers through broad product selection, low prices, and decent service. Best Buy has enough competition and challenges on other fronts that I don’t expect it to grow too fat and happy, but it no longer has to worry about its most direct rival.

Of course, if Best Buy’s management is smart–and it is–it’ll continue to run scared. Jim Collins’ business bestseller, Good to Great–published in 2001–lavishes praise on Circuit City as one of the country’s best-run companies of any sort. It took Circuit City only eight years to go from glory to death. Bottom line: Best Buy could be dead in a decade too, if it doesn’t make its customers happy…



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A Little Less Lenovo


LenovoThe crummy state of the economy continues to bring crummy news for the tech industry: Lenovo announced today that it’s letting 11 percent of its workforce go as part of a broad restructuring. It’s also reducing executive compensation by 30 to 50 percent (sorry, guys!).

Buried in its press release is one tidbit that might be a plus for Lenovo customers: It’s relocating its customer-support call center from Toronto to Morrisville, North Carolina, the company’s main North American site. If this involves Toronto staff losing their jobs, it’s regrettable for the folks who are impacted. But I’m a big believer that tech support staffers provide the best help when they work most closely with the rest of a company’s team. And it’s good to see that Lenovo isn’t reacting to economic pressures by relocating tech support to another country where language issues could stand in the way of solid tech support.

Posted by Harry McCracken at 8:34 am

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OLPC Slashes Staff, Refocuses Mission

By  |  Posted at 8:01 pm on Wednesday, January 7, 2009

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olpcJust weeks after administering its “Give One, Get One” holiday season drive, the One Laptop Per Child (OLPC) foundation has cut its staff by 50 percent to downsize its operational costs. But the news is not entirely grim: OLPC has announced several new technology initiatives.

In a blog posting, founder Nicholas Negroponte explained that as a non profit, OLPC is bearing the brunt of the worldwide economic downturn. It has reduced its team down to 32 people, and the remaining personnel have reduced compensation. With luck the person that produced the foundation’s creepy John Lennon ad wasn’t spared the pink slip.

Negroponte reaffirmed the organization’s commitment to its mission of providing children in developing countries with laptops. To that end it will embark on several new technology initiatives. Those include:

1. Development of Generation 2.0 of the XO laptop
2. A no-cost connectivity program
3. A million digital books
4. Passing on the development of the Sugar Operating System to the community.
5. Creating a $0 laptop to be distributed in the least developed countries.

The foundation will also change its deployment strategy, targeting Afghanistan and Northwestern Pakistan, the Middle East, and sub-Saharan Africa. Further, it is restructuring its Latin America operations into a separate support unit.

500,000 children have already received laptops, according to OLPC. Computer literacy plays a role in economic development, and the foundation’s work should continue. Let’s all hope it rides out the downturn.



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Semiconductor Sales Decline Slightly in 2008

By  |  Posted at 5:24 pm on Friday, January 2, 2009

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The Semiconductor Industry Association, a trade group comprised of computer, device, and chip makers, is reporting that chip sales dipped to $20.8 billion in 2008 from $23.1 billion in 2007, New York Times is reporting. It’s yet another sign of the U.S. economy’s fragile condition. But the “glass is half full” part of my brain can’t ignore the fact that sales are still brisk.

We already knew, of course, that businesses and consumers are spending less on IT. It makes perfect sense that non essential capital expenditures would lower: you can’t eat silicon. Innovations in technology can give businesses an edge, but when it comes time to tighten the belt, it is better to delay buying new workstations or BlackBerries for interns than it is to cut advertising or hand out pink slips. Consumers can afford to wait another year for the latest and greatest gadget.

There could be other contributing factors. Aside from the economy, the industry is on the downward edge of a sawtooth. I’m not going to buy a new computer today unless I have to, because OS X Snow Leopard and Windows 7 aren’t out yet. Many consumers are informed enough to know that they may want to hold off purchases for those releases.

While it is widely accepted that 2009 will be a difficult year economically, that does not mean that every sector of the economy will be affected equally. The IT industry is not the automobile industry–let’s not panic because one report tells us what we already anticipated.



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Happy New Year Microsofties, Here’s Your Pink Slip?

By  |  Posted at 1:26 am on Thursday, January 1, 2009

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Happy New Year Technologizer readers. Of course we have to start 2009 off right with some fresh layoff rumors from the world of tech, and this time it’s coming from Redmond.

Yes, Microsoft. The one who likes to point out it never lays people off (well at least officially). It’s no small pruning either: anywhere from 10 to 17 percent of the company’s workforce will be let go–or so the scuttlebutt says.

Pink slips are set to be handed out January 15 if you believe what’s being written, which would put it a week before the company announces its quarterly earnings.

The company is declining to comment on the reports, calling them “rumors and speculation.” Nobody seems to have any way to confirm it either, so I guess we’ll have to wait for folks to begin walking out of their offices with cardboard boxes in tow. If they indeed do.

We’ll probably find out sooner than that, however, as Microsoft is mandated by securities law to inform stockholders of actions that may affect its stock price within 24 hours.

Blogger Mini-Microsoft seems to think that layoffs may not be in the cards, however at the same time he seemed to suggest that the pullbacks might come in another way, such as reorganizations, phasing out of projects, and the like.

I guess we’ll see what happens, no?



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Michael Dell Targets Executives with Layoffs

By  |  Posted at 6:26 pm on Wednesday, December 31, 2008

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Dell logoHey dude, you’ve got a golden parachute. Dell Computer founder Michael Dell has fired the executives that he handpicked to turn the financially ailing PC manufacturer around when he returned as CEO in 2007, and may target lower level executives next, according to press reports.

The reports indicate that Michael Cannon, who has served as president of global operations and had responsibilities for streamlining manufacturing operations, will assume another role. Mark Jarvis, Dell’s chief marketing officer, is out. The duo received a combined US$22.8 million in compensation.

Until now, the company has asked its rank and file employees to bear the brunt of its cost savings. Employees were asked to take unpaid days off in November. Around that time, the company also began to charge customers a monthly fee for premium support.

While the company’s stock value has plummeted, it has remained profitable; albeit less profit than it was two years ago. It has assumed more debt, but its overall financial health is okay.

A Datamonitor Industry Market Research report from Apr. 2008 has Dell with a 8.1% share of the global computers & peripherals industry. Without having to play around with ratios, I’m confident that the company is not going under any time soon. When the world economy turns around, so will Dell–provided it has competent people in charge of its marketing and operations.



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comScore: Black Friday Online Sales Up 1%

By  |  Posted at 10:23 am on Monday, December 1, 2008

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The US’s biggest retail shopping day of the year turned out fine after all, although the results were likely nowhere near as good as investors would have liked. While data shows brick-and-mortar retail sales were up 3 percent, online sales rose only 1 percent.

comScore says that $534 million was spent by consumers online on Friday, likely attracted by better-than-normal deals being offered by desperate retailers. There was some crazy deals: the Epson store offered its R280 photo printer for $29.99, a $70 savings.

Traditionally, heavier online shopping comes today, known as “Cyber Monday.” This is basically due to the fact that as people return to work, they use their downtime to further complete their holiday shopping. It has also been perpetuated by online retailers, which have begun to offer special deals just for the day.

Looking around, there’s not as many deals this year, although Best Buy has its own special page as does competitor Circuit City. comScore says to watch the growth for Cyber Monday: typically it has come within a few percentage points of the overall holiday season growth for online shopping.

If comScore is right, expect that number to be flat. The firm says it sees no growth year-over-year for online shopping.



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eBay Struggles, Pageviews Declining Significantly

By  |  Posted at 2:12 pm on Tuesday, November 25, 2008

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ebaylogoNext time you hear some media talking head claiming that hurting consumers are running to eBay in droves for better deals, you can call their bluff. Nielsen released data that shows the auction site is continuing to lose eyes as the economy worsens. The data shows a precipitous drop off beginning in September, right around the time the US economy really began to tank.

eBay saw its some of its best times late last year, averaging around 13.5-14.5 million pageviews per month during the holiday season. However, after those good times, the auction site began a essentially steady decline.

You can almost see the point when consumers began to panic. August shows about 11 million pageviews, but by September that had fallen to 9.4 million. October was even worse, ending at about 9.1 million pageviews. The August to September drop was the largest decline outside of the normal post-holiday slump in two years of data.

Now forgive me here — I am no math major — but I’m going to do some number crunching. Using last holiday as a guide, it looks like we can expect about a 10% or so bump up for the holidays. Even if this occurs, eBay’s traffic would be down about 20-30% year over year. This seems about right — October’s traffic numbers were down a third from last year.

The economy may not be the only reason here. Silicon Alley Insider (which I think goes a bit overboard with the title, it is not that bad yet) surmises that stronger competition as well as the fact that eBay’s value proposition isn’t as great is also helping to accelerate the decline.

I’d agree with this: eBay has become less of a bargain these days. I’m noticing that more and more items look like a good deal at first glance, yet the money’s being made elsewhere, whether through “handling” charges, or obviously inflated shipping costs.

eBay’s not helping either, alienating some of its sellers by tinkering with its selling fees far too much.

For those of you that like pretty little charts, I’ve included this data graphically after the jump.

Continue reading this story…



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Confirmed: Cisco Shutting Down For Four Days

By  |  Posted at 10:25 am on Tuesday, November 25, 2008

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Cisco logoTechnologizer has confirmed claims by UBS Research that Cisco is preparing to shut down for four days at the end of this year in a likely effort to cut costs. It would be the first time in the company’s history, and probably means things in Silcon Valley are worse than we think. The information comes from an employee within the company.

Add to this some details from Om Malik, who claims that an “major annual internal event” has also been postponed, and you must begin to question how well Cisco’s doing. Altogether, the effort would save the company about $1 billion. (Our source says he knew nothing about any event cancellations).

This is in addition to a hiring freeze and cutback of non-essential events as part of a broader plan to save money in 2009. With such uncertainty, that is probably a good idea.



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iSuppli Slashes PC Sales Outlook for 2009

By  |  Posted at 2:48 pm on Thursday, November 20, 2008

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Next up on the bad tech economy news parade: iSuppli. The analyst firm sent out an advisory Thursday indicating that it was reducing its PC unit shipments forecast for growth by a stunning two-thirds. The reason? You guessed it, the economy.

The changes mean that instead of the 11.9 percent growth it had projected back in September (with the way things have been changing so rapidly, that now seems like an eternity ago), it now sees only 4.3 percent growth in 2009. iSuppli has also revised down its forecast for 2010, although it does show some improvement over 2009 nonetheless: 7.1 percent growth, down from its earlier forecast of 9.4 percent.

Analyst Michael Wilkins directly mentions the credit crisis as having a large impact on larger-ticket purchases like PCs, and its hurting the consumer as well as the enterprise.

“The result of the financial turmoil is less money to spend, and often that money is itself more expensive,” Wilkins said. “With less money to spend, application markets, like PCs, have been impacted.” All in all, we shouldn’t really complain. The PC market has had solid growth for the past five years, growing at double digit rates. 2008 was to be the sixth straight year, but now it appears as if that will not happen.

Regardless of market conditions notebook PCs should still manage to post growth, up 15 percent this year. Desktops on the other hand will continue to see shrinking sales, down five percent from 2007.

No word from either Gartner nor NPD, which also produce PC sales forecasts on whether they’ll be doing some face-saving by tamping down growth numbers a bit.



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PriceGrabber Survey Shows Grim Reality of Faltering Economy

By  |  Posted at 8:09 pm on Tuesday, November 18, 2008

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While PriceGrabber is known more for its comparison shopping service, from time to time it conducts surveys of its user base to gauge consumer trends. It’s most recent survey took a look at consumer’s holiday shopping habits, and the results are not pretty.

71 percent of online consumers plan to spend less during the holiday, citing inflation and the worsening economy as reasons for doing so. Two-thirds plan to give “practical” gifts, which include cash, gas cards, money, and other necessities.

Only 13 percent seem unfazed, saying they are not changing their spending habits as a result of economic conditions. A quarter are not changing their spending habits but attempting to save money when possible, and the remainder are making a concerted effort to pull back.

Some of the techniques most commonly used are sticking to a budget (53 percent), shopping at discount/outlet stores (43 percent — Walmart stock anyone?), and using shopping comparison websites (37 percent).

Many are staying home to shop: 55 percent expect to do a majority of their holiday purchasing online, up 10 percent from last year.

All this likely means less money will be spent on those big ticket high-tech gifts: HDTVs, Blu-ray players, DVRs, and so forth. That is not good news for the tech sector — which up until recently was actually fairing well when compared to other industries.

I know I have been beating the drum for the bears of Wall Street a lot here lately. However, in an increasingly technology-hungry society, a significant downturn will have significant effects for tech. In the last significant recession back in the early 1990s, the industry was still in its infancy. Now, we’ve got our eggs in a lot more baskets, and a lot more prone to the vagaries of the economy.

(Note: the PriceGrabber survey was taken October 20 to November 10, and surveyed 2,641 respondents through an online survey. It has a margin of error of 2%.)



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Game Companies in Trouble? That Isn’t Necessarily Bad News For Games

By  |  Posted at 11:38 am on Thursday, November 6, 2008

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It’s been a rough couple of weeks for the video game industry, once touted as recession-proof.

The carnage began last Thursday, when Electronic Arts announced a 14 percent drop in stock, followed by a cut of 500 to 600 jobs–6 percent of the workforce. THQ followed suit by sending pink slips to a third of the staff from one studio and shutting down at least four others entirely.

I have a soul, so let me first say that it’s terrible when people lose their jobs, especially at a time like this. But on the bright side, the overall quality of video games themselves aren’t likely to suffer as a result.

Continue reading this story…



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