PC sales slowed dramatically in November and, in a new twist, consumers often paid more for less.
The monthly growth of retail desktop sales nose-dived to 11 percent, down from a 21.5 percent growth rate in October, according to researcher PC Data. Similarly, notebook computer sales only grew by 18.2 percent in November, down from 43 percent the previous month, PC Data said.
More chilling are rising PC prices and leaner configurations. Average prices jumped nearly 20 percent since October, analysts said.
A triple whammy is to blame. Availability problems in the market's low end, component price increases, and the effects of summer Net rebates contributed to November's results, said analysts.
The biggest prices climbs have come among low-end systems. In particular, prices in the sub-$600 market are rising and will continue to do so through early next year, said PC Data analyst Stephen Baker.
"Instead of being $499 or $549, the floor is going to be closer to $599," Baker said. [Memory] cost is one issue, but more importantly, there is some dissension about what the value is of being $499 vs. $599. In a lot of customers' minds it doesn't seem to be a big change. But the potential losses [for PC makers] are big going down a hundred bucks in price."
Allison Boswell of market researcher the Boswell Report said the average selling price of PCs jumped 19.2 percent in November, or $154. Prices in December have increased another 1 percent, with the average PC selling for $993, she said.
"There's a lack of inventory in the sub-$1,000 market and increased availability at the high end," Boswell said.
In October, sub-$1,000 PCs accounted for 74.8 percent of retail inventory. A month later, it had dropped to 53.1 percent, with less than a 2 percent recovery in December, she said.
Rising component costs too have taken their toll.
As reported in October, rising prices for memory, CD-ROM drives and other components and the effects of the Taiwan earthquake have conspired to make for leaner and more expensive PCs. For instance, PC makers are putting in 64MB of memory in a sizable portion of their machines. In the summer, before the shocks, many mid-range consumer systems came with 96MB or even 128MB of memory, according to PC Data.
Conversely, keeping the memory configuration the same can work out to a hidden price increase, anywhere from a $75 to $150 on every system, analysts said.
Baker predicted better growth for December but still well below expectations.
"Given how slow the last two months have been, I wouldn't imagine December would be a lot better," he said. "You can expect about 20 percent growth in December, which still isn't that great."
For November, according to PC Data, Compaq Computer led the retail consumer PC market with 35.4 percent share, followed by Hewlett-Packard at 29.6 percent, Emachines at 15.7 percent and Apple at 9.8 percent. IBM, which next week is largely exiting the retail market, pulled up the rear at 4.6 percent. In the future, IBM will mostly sell to customers directly via the Web, like Dell and Gateway. PC Data does not track direct manufacturers.
The HP Pavilion 6535 was the best-selling consumer PC at retail, at an average cost of $587, according to PC Data. The Compaq Presario 5441 followed, at $542, with the Emachines eTower 400IE, at $469, taking the third spot. The $730 Compaq Presario 5461and Emachines etower 466ID, at $656, rounded out the top five.
Compaq also led the retail consumer notebook market with 27.1 percent share, followed by Toshiba at 22.4 percent and IBM at 16.9 percent, according to PC Data. Sony followed at 14.2 percent market share, with Apple, at 10.8 percent, taking the fifth position.
Apple's two iBook models, which sold for an average $1,540, captured the consumer retail crown, according to the research firm. The Toshiba Satellite 1555, at $1,105, and the $1,273 Compaq Presario 1247 followed. The Compaq Presario 1277 and Sony Vaio PCG-F350 rounded out the leaders, with averaging selling prices, respectively, of $1,521 and $2,288.
AMD held its own against Intel in the chip realm, with K6-2 processors in three of the top-selling notebooks and two PC leaders. Intel did best in PCs, with three of the top five consumer systems packing Celeron processors. But in notebooks, Intel scored only one hit, with Sony using the 366-MHz Pentium II processor.