The week in review: The Grinch who stole PC sales

PC companies and retailers banking on a sales pickup in the fourth quarter are bracing for bad news--consumers are not flocking to buy new PCs during the holidays as anticipated.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
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Steven Musil
4 min read
PC companies and retailers looking for a sales surge for the holidays may be in for some bad news, as new data shows consumers may not be flocking to buy new PCs as anticipated.

Sales, in fact, are downright dismal, with one market researcher reporting retail PC sales in October plunging 18 percent year over year.

At least a dozen analysts downgraded Gateway after the computer maker slashed its earnings and revenue forecast for the current quarter. Weak computer sales over the Thanksgiving holiday weekend--traditionally a time of booming personal computer sales--prompted Gateway to lower its projections. The company?s stock lost 40 percent of its value in one day and is down 75 percent since the beginning of the year.

Analysts warn things could get just as bad, or worse, for Apple Computer and Compaq Computer. Both face a potential consumer PC sales crisis because of slowing sales, growing inventories and a looming first-quarter price war. While no PC company will remain unscathed by the triple whammy, these two appear to be particularly exposed.

Compaq chief executive Michael Capellas attempted to calm employee worries about the jittery PC market, saying in a memo: "There is continued volatility in the market today, particularly in technology stocks?I know this creates a lot of uncertainty for employees.

"We do see softness in some markets and an overall slowing in the rate of growth in the North American economy," Capellas said.

?Tis the shopping season
Shoppers are buying gifts online in unprecedented numbers this year, putting 2000 on track to be the best holiday season ever for e-tailers. While some data in various studies differ, the trends are encouraging as many e-tailers are still licking wounds from a shakeout that forced hundreds of companies out of business.

However, Amazon.com and BestBuy.com had a rough start this season, struggling with outages just as customers were flocking online after Thanksgiving. One reason for BestBuy's troubles was the rumor that it would begin selling the much-hyped and hard-to-find PlayStation 2 video game player.

As the shopping season gets into high gear, companies ranging from online portals to credit card giants are trying to calm fears about online privacy and fraud, two thorns in e-commerce's side. Online credit card theft is the biggest worry for customers who decided not to buy goods online; the second-biggest fear is a reluctance to give Web sites personal information.

To that end, Microsoft, VeriSign and WebMethods said they have developed technology designed to make it easier to use digital signatures and other online security tools with e-commerce applications. The software trio is aiming to make the new technology, called the XML key management specification (XKMS), a standard. The technology is intended to help programmers easily add digital signatures and data encryption to their e-commerce applications.

Tough call
Saddled with large capital debts and slumping stock prices, many cable operators aren't enjoying the same crest of excitement as they did in the late 1990s when massive mergers and ambitious plans for new services were being announced.

So when the cable industry's leaders gathered for The WesternShow, an annual industry convention, most players were a bit edgy. Many are still reeling from one too many blows, from low stock prices and problematic launches of next-generation interactive services, such as high-speed Net access, interactive television and cable telephony.

A new joint venture between AT&T Wireless and Japanese giant NTT DoCoMo stands to shake up a U.S. wireless Web market that has trailed well behind overseas leaders. The deal gives DoCoMo, Japan's largest mobile phone company, a U.S. platform for its hugely popular i-mode service, in return for a $9.8 billion investment, or 16 percent stake, in AT&T Wireless.

In other news, Verizon Communications broke off its merger agreement with struggling high-speed Net company NorthPoint Communications, citing a "deterioration" in the smaller company's business operations. In a terse press release, Verizon said its merger agreement allowed the company to break ties if any material changes to NorthPoint's business occurred.

The breakup served as a stark reminder for struggling network companies: Even the largest telecommunications companies are still poor life preservers in a stormy market.

Chip concerns
In the midst of his company's dramatic stock slide, Broadcom chief executive Henry Nicholas told shareholders that he is comfortable with Wall Street's near-term expectations and said the chipmaker's future is as bright as ever. Shares of the communications chipmaker have fallen more than 65 percent since late last month.

NEC will recall close to 300 notebooks containing Transmeta's Crusoe processor because of a manufacturing flaw with a batch of chips. The recall affects an estimated 284 notebooks, all of which have been shipped in the Japanese market. Transmeta has fixed the problem, so no further chips containing the flaw are being produced. The flaw made it difficult to reinstall operating systems on the notebook.

However, Sony isn't recalling its Transmeta-based notebooks, although the company is warning Japanese customers that some of the computers might have problems. Sony said it will not recall Vaio notebooks containing Crusoe chips from Transmeta. Sony said the potential problem is limited to products sold in Japan.

Also of note
Former White House press secretary Joe Lockhart has joined Oracle's senior management team and will be in charge of communications at the company, reporting directly to chief executive Larry Ellison?Lernout & Hauspie, the troubled maker of speech recognition software, filed for Chapter 11 bankruptcy protection?Microsoft's Webcast of Madonna's London concert was intended to showcase the company's multimedia technology--billed as "near-DVD quality"--but the performance left many virtual fans unimpressed?IBM named lawyer Harriet P. Pearson chief privacy officer, as the company jumps on one of the most important policy trends in business?Newly public companies that have women in senior management enjoy higher initial public offering prices and higher earnings per share than companies that have all-male management teams, according to a new study.