Notebook PC sales continue to be a bright spot for retailers, but looming component price increases could threaten the double-digit growth rates the portables have seen in recent months.
Notebook sales were up 30 percent year over year in February, according to NPD Techworld, a market researcher. But the machines sold for an average price of $1,450 each during the month, down $150 from $1,600 in the year-earlier period.
February's performance extends the string of strong monthly growth for notebooks. In January, for instance, sales were up about 16 percent year over year. Sales also rose 21.5 percent year over year during the fourth quarter, as more sophisticated repeat PC buyers, some on their third PC, showed their willingness to step up to somewhat more expensive notebook models to gain portability.
But analysts say impending price increases could put those growth rates at risk. Sony, for one, has already raised prices on some notebook models between $100 and $200, citing the higher cost of LCD (liquid-crystal display) panels.
"The problem (for manufacturers) is that notebooks are most likely to be affected by pricing as component prices go up," said Steve Baker, an analyst with NPD Techworld.
Though manufacturers can manage price increases in memory by reducing the amount they ship with each computer, it is a greater challenge to deflect rising LCD screen prices because the screen is more integral to the system. And despite some efforts to make screen technology more standardized, notebook makers also still typically contract with one main supplier for the screens for each notebook model.
A jump of even $100 on average could slow sales at retail, Baker said. "You'll see some kind of slowing in the growth numbers," he said. "But (growth) won't slow to desktop levels."
That's a good thing, since desktop sales continue to slip at retail. They declined by as much as 25 percent year over year in January and February, Baker said.
It remains to be seen whether other PC manufacturers will join Sony by raising prices outright. In part, that is because lower prices can translate into larger sales. Toshiba, for example, used price to take the No. 1 spot in sales during February, with 25.5 percent of the market, according to NPD Techworld.
Meanwhile, Dell Computer said last week that it sees component prices beginning to plateau.
So although LCD and memory costs have trended upward from their lows of last year, notebook prices may remain steady as PC makers head down the stretch toward their spring model refreshes. PC makers instead could reconfigure their new models slightly or tweak the rebate offers they provide to customers.
LCD panel prices are likely to be the hardest to predict, thanks to a combination of higher sales of desktop flat-panel displays and limited production capacity. But DRAM (dynamic RAM) prices have declined in some areas such as the lower, long-term contract pricing agreements memory makers ink with buyers.
Faster mobile processors, including a new 1.8GHz Pentium 4-M expected April 23 and new Athlon 4 chips from Advanced Micro Devices, are likely to spur notebook demand to some extent. Price cuts from both chipmakers expected later this month are likely to at least partially offset price increases for other components.
If notebook prices hold fairly steady, growth rates should continue pushing the portables "to the point where notebooks could actually pass desktops in revenue at retail," Baker said.