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PC sales stay strong in stores

Retail shoppers are still finding attractive bargains as powerful specifications stay cheap.

Retail PC sales were fairly strong during the first quarter of 2006, as notebook growth stayed in the stratosphere while desktops actually made a bit of a comeback, according to analysts.

Notebook sales have been driving the PC market for the last several years. NPD Techworld's Steve Baker expects that to ease one of these quarters, but it didn't happen during the last three months. Notebook sales by retail outlets were up 50 percent in the first quarter compared with last year's first quarter, accompanied by some aggressive pricing on the part of vendors such as Toshiba, Baker said.

But desktop PCs haven't fallen totally out of favor with retail buyers, said Sam Bhavnani, an analyst with Current Analysis. More notebooks have been sold than desktops at retail over the last few quarters, but desktop sales regained some ground to finish nearly even with notebooks during the first quarter, he said.

"The specs are stimulating demand," Bhavnani said. "People are getting so much for, relatively speaking, a good value, that it makes people more inclined to buy." PCs with 1GB of memory are becoming more and more common, and hard drives of more than 120GB are everywhere, he said.

The first quarter is always a bit slower than the fourth, when holiday shoppers often drive PC and chip companies to their strongest results of the year. This year, the drop from fourth quarter to first was a little more pronounced, echoing Intel's warning in March that earnings would fall short of expectations. But when compared with the first quarter of last year, PC shipments were up 28 percent, versus growth of 19.4 percent recorded during last year's first quarter.

The market looks pretty good for PC vendors through the third quarter, after which the effects of Microsoft's decision to delay the launch of Vista will be determined, Baker said. Some analysts feel the overall impact of the delay will be muted, but others are worried.

Current Analysis and NPD track the U.S. retail market, which excludes sales from Dell and the direct sales of the other PC vendors. But the results often point to emerging trends in the overall consumer PC market.

The picture will become a little clearer over the next few weeks as companies like Intel, Gateway and Apple Computer report their first-quarter results. Advanced Micro Devices continued its streak of winning quarters in results posted earlier this week, due in part to market share gains in desktops and notebooks at the expense of Intel. Dell and Hewlett-Packard, the two largest PC vendors, report their operating results on a different schedule than the other companies.