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PC sales see a ray of light

June figures mark the strongest retail sales month--relatively speaking--for desktops in nearly two years, due in part to heavy rebating and promotional activity.

The U.S. retail PC market took a big step forward in June.

After steep declines in April and May, total retail PC unit sales in June were down just 1.1 percent compared with June 2001. But they rose 24.2 sequentially from May of this year, somewhat more than usual, according to market researcher NPDTechworld.

June was--relatively speaking--the strongest sales month for desktops in nearly two years in a year-over-year comparison, due in part to heavy rebating and promotional activity from manufacturers. Notebook sales increased as well, thanks to strong demand for the portable machines.

Desktop unit sales slipped 6.5 percent year over year from June 2001, an improvement on declines in the range of 20 percent in some recent months. They were up 21.5 percent sequentially from May, an increase that was slightly higher than expected.

Notebooks continued to show strength, thanks to demand for souped-up systems with Pentium 4 processors as well as healthy allotments of memory and built-in CD-rewritable drives. Notebook unit sales rose 13.3 percent year over year from June 2001 and 28.2 percent sequentially from May, NPDTechworld figures show.

Does all of this mean that the retail PC market is bucking the economic uncertainties, stock market vacillations and corporate scandals splashed across the evening news?

"It's still too early to say," said Steve Baker, an analyst with NPDTechworld. "But this may be the bottom."

Whether retail PC sales really have bottomed out won't be known until results are in from the final weeks of August. At the very least, though, comparisons from last year are favorable because sales were so low at this time in 2001 that it's easy to show an improvement, he said.

June was a "five-week" month, which helped its comparison against four-week May. But the 24.2 percent sequential increase this year beat June's typical 17 percent increase by a good bit.

Overall, Baker said, "the trends are moving the in the right direction."

Notebook units advanced despite a rise in the average price for a notebook, which edged up $49 year over year. The average selling price was $1,548, up from $1,499 in June 2001 and up about $100 from earlier this year.

But PC makers do face a potential catch-22 on price. While desktop unit sales--which still make up the majority of the retail market--are improving, the $801 average selling price for the category during June was the lowest recorded in months. That's down from $822 in June of last year and from $827 and $807 in April and May, respectively, of this year.

The average price decline comes from vendors such as Hewlett-Packard offering rebates to help motivate customers and clear out inventory, Baker said.

HP reduced its inventory of Compaq Presario desktops from 10 weeks worth of sales in May to slightly less than six weeks worth in June. Meanwhile, HP Pavilion desktops dropped several days to just under six weeks worth in June. The ideal amount of inventory is considered to be three weeks.

But for the rest of the year, continued declines in the average price for a desktop could put a dent in any increases in revenue and profit that comes from higher unit sales.

"The wild card will be pricing. If that goes down too much, the benefits of building volumes (increased revenue and profit) are nixed," Baker said.

Meanwhile, HP--which completed its merger with Compaq Computer in May--now owns most of the retail market. HP represented a combined 61.7 percent of desktop unit sales and 51.3 percent of notebook unit sales at retail during June.

But the company has slipped a bit, opening the door for eMachines and Sony on the desktop and Toshiba and Sony again on the notebook side. HP and Compaq's combined market share peaked at 78 percent in the desktop market in January.