And fall it has for computer makers selling in retail stores, according to market researcher PC Data. In January, retail sales of desktop PCs plummeted 26 percent in units and 28 percent in dollars compared with the same period last year. Notebooks fared a bit better, with sales down 9 percent in units but only 6 percent in dollars.
"Obviously, it's another bad month at retail," PC Data analyst Stephen Baker said.
But there is at least one gold nugget. Consumers are spending more money. Sales of PCs priced between $1,000 and $1,500 rose 65 percent year over year.
Apple Computer and Emachines took the biggest hits in January, with sales down 60 percent and 50 percent, respectively, year over year. Compaq Computer saw a modest 5 percent decline, while Hewlett-Packard's sales dropped 17 percent.
Compaq recaptured the retail store lead from HP, with 45 percent market share compared with its rival's 39 percent. In December, the situation was nearly a mirror image to January: HP had 44 percent share, compared with Compaq's 36 percent.
"That's about the highest combined market share the two have ever had," Baker said. "Compaq and HP clearly have entered a two-horse race."
Emachines took the third spot with 10 percent share.
The average selling price fell 4 percent year over year to $850 but rose 3 percent from December's $827. The change in selling prices comes as the sub-$1,000 market continues its decline and consumers crave PCs with more features. PC Data reported that sub-$1,000 PCs in January accounted for 64 percent of retail sales, the lowest since February 1999.
Higher-price sales soar
For the second month in a row, PCs priced between $1,000 and $1,500 made up about one-third of the retail market, with unit sales up 65 percent from the same period last year. But the average selling price dropped to $1,050 from an average of about $1,250 over the last few months, according to PC Data.
"If you look at the mix, the fact that $1,000 to $1,500 has been the best-performing category says that people who are buying want systems that give them everything they want," Baker said. "They want a big drive, 128MB of RAM, CD-RW and DVD, and they're getting all those things."
Baker said average prices are likely to settle in the $1,100 range.
"If we're seeing lower prices at the high end and lower market share at the low end, it means the mix is better. We may be seeing declines, but we're seeing a better mix for PC makers," he added.
Baker credited Advanced Micro Devices and Intel for building up sales in the $1,000-to-$1,500 price segment.
"There's been good marketing from Intel and AMD," he said. "They've been able to keep those kinds of products in Athlon and Pentium III kind of families. That's important because there are more margins in that $1,099 level, which is where those systems fit in."
While AMD is sometimes viewed as the low-cost alternative to Intel, AMD systems carry higher retail selling prices, according to PC Data. For the eighth month in a row, the average selling price of AMD-based PCs topped Intel-based ones, $896 vs. $802.
Baker said the sub-$600 market is a major contributing factor knocking down Intel-based selling prices. Intel has about 80 percent share in the segment. In other price categories, the split is more like 55 percent Intel vs. 45 percent AMD. For the overall Windows-based PC retail market in January, Intel had 57 percent share vs. AMD's 43 percent.
Overall, Intel's Celeron and Pentium III processors had 31 percent and 24 percent share, respectively. AMD's Duron and Athlon captured 22 percent and 20 percent market share, respectively. Intel's Pentium 4 accounted for a scant 2 percent of sales.
Intel's delayed release of Pentium 4 may have hampered retail system sales. Because the chipmaker released the processor in late November, many PC makers could not adequately stock for the holiday rush. Pentium 4 systems also sold at higher prices and thus dampened sales, PC Data concluded.
Notebooks lose, but gain
Notebooks fared better than desktop PCs, but with signs the market is rapidly changing. Although overall unit sales dropped 9 percent, some notebook makers showed strong gains.
Sony sales rose 137 percent year over year, while HP gained 85 percent. But Apple, Compaq and Toshiba declined 36 percent, 41 percent and 33 percent, respectively.
Baker said Compaq's notebook decline is not surprising.
"There's a lot more competition in the market than last January when Compaq had 45 percent share," he said. "Given they've had two pretty good companies take a crack at them, it's not surprising they'd have lower unit shipments and market share."
Still, Compaq firmly held onto its retail market lead, with 29 percent share. HP and Sony followed with 25 percent and 24 percent share, respectively. Toshiba captured the fourth spot with 16 percent market share, while Apple pulled up the rear with 2 percent.
Selling prices show some startling trends. The sub-$1,000 market, with 17 percent share, more than doubled from December. Still, PC Data reported that notebooks priced between $1,000 and $2,000 made up two-thirds of the market.
Sony showed the steepest overall declines, with average selling prices falling $500 since summer. In January, Sony's average selling price was $1,872.
"They're definitely being more aggressive in pricing, whereas Compaq and HP prices are fairly stable," Baker said.
The average Compaq retail notebook sold for $1,476 in January compared with $1,526 for HP, according to PC Data.