NPD INTELECT Data Show Holiday Sales Growth At Retail Across Many Information Technology Categories

PORT WASHINGTON, NEW YORK, January 18, 2000– Despite the twin threats of e-commerce stealing brick-and-mortar retail sales and PC manufacturers selling directly to consumers without traditional retailers as middlemen, computers and related information technology (IT) products flew out of stores during the 1999 holiday sales period, according to NPD INTELECT. The holiday season saw unit sales increases across numerous computer-related categories, from desktops and notebooks to printer cartridges.

Computers Post Healthy Unit Gains

With the e-commerce frenzy driving consumers to the World Wide Web and computer manufacturers like Dell and Gateway bypassing traditional retail channels by selling directly to customers, computer retailers had reason to worry as they headed into the holidays. NPD INTELECT’s 1999 data confirm the strength of traditional channels, assuaging the concerns of traditional IT retailers: unit sales of desktop systems were up 19% over December 1998, and notebook computers shot up 25%.

Significant shifts in brand share characterized December 1999 personal computer sales. Compaq remained the leader in both desktop and notebook computer sales by unit, selling about 80,500 more desktops and 21,000 more notebooks in December 1999 over December 1998. Apple’s appearance as a top brand in both desktops and notebooks in December 1999 may be attributed to its introduction of the iMac line after the 1998 holiday season. Channel share in December 1999 for both desktop and notebook PC sales did not change significantly from the previous year’s numbers.

“1999 was a busy year for mergers, changing distribution strategies and new product lines for PC manufacturers. Apple, with its new iMacs, and Emachines are prime examples. Emachines leaped from selling about 26,000 desktops in December 1998 to selling more than 167,000 one year later. This brand took off because it was the first of the “bargain PCs” to hit retail channels, selling machines at the $500 price point long before any of the big names. Packard Bell, once the top-selling PC brand in retail, merged with NEC and opted out of the retail sales channel. Acer and IBM also left the retail arena. These changes altered the PC industry,” said Sima Vasa, NPD INTELECT divisional vice president for technology products.

Personal Digital Assistant Sales Skyrocket

In the PDA world, the fastest growing IT category, unit sales were up 169% compared to December 1998. Market leader 3Com continued to dominate at the high-end of the pricing spectrum with its PalmPilot line, holding its 1998 leadership position by ranking first in 1999 unit share and climbing 8.1%. Two of 1998’s top five PDA manufacturers, number three Philips and number five Royal Business, dropped further down in the 1999 retail unit share ranking. This made room for top five newcomers Sharp and Compaq, ranked sixth and tenth in 1998 and second and fifth, respectively, in 1999. The channel seeing the most growth in PDA sales in December 1999 was computer specialty/office supply stores, with 70.8% unit share of retail sales, up from 63.6% in December 1998. The electronics specialty store PDA share was down nearly ten points, hitting 22.7% in December 1999.

NPD INTELECT finds PDA buyers placing convenience and mobility ahead of price when making purchasing decisions. Ms. Vasa elaborated on the 1999 PDA market changes. “Consumers are willing to pay a high price for the total mobility of personal digital assistants. They’re paying $700 for high-end PDAs when it’s possible to buy a complete desktop PC for about the same amount. People rely on the new functionality of handheld devices for easier, more efficient completion of some of the tasks formerly reserved for desktop or notebook PCs. Scheduling, managing address books and other routine applications can be handled extremely efficiently with a PDA, without the effort required to access those programs on a PC. By making leaders of the high-end PDA brands, consumers have shown the industry they’ll pay for products that match their fast-paced, mobile lifestyles,” she said.

Inkjet Print Cartridges and Printers Show Strength

In another high-growth IT category, inkjet printer cartridge retail sales were up nearly a third since December 1998. This strong performance bodes well for inkjet printer cartridge and inkjet printer manufacturers alike: as printer prices decrease, inkjet printer manufacturers count on the margin assured by printer owners’ multiple purchases of inkjet cartridges over the lives of their printers.

Lexmark, up 2.8% in unit share, was the only inkjet cartridge brand to gain unit share during the holiday rush. December 1998’s top five cartridge brands held their positions, even if they dropped slightly in unit share: Hewlett Packard ranked at the top, followed by Canon, Epson, Lexmark and Data Products, respectively. The combined computer specialty/office supply store share was 72.9% in December 1999, down a few points from their combined share of 76.2% one year earlier. Discount stores, with 15% of sales, beat electronics specialty stores in inkjet cartridges, a change from the 1998 holiday season.

“Inkjet printer sales were up more than 10% in December 1999. Over the last few years, INTELECT has closely watched the relationship between inkjet printers and inkjet cartridges. We know that each time printer sales gain a point, inkjet cartridge sales go up. Inkjet cartridge sales are very important to printer manufacturers because they can have 35 to 40% margins. Holiday 1999 shoppers were especially kind to Lexmark, the only brand to climb in both printer and inkjet cartridge sales,” Ms. Vasa said.

In inkjet printers, up more than 10% as a group, Hewlett Packard made waves with a 7.8% unit share increase over December 1998. The top five inkjet printer brands shuffled slightly, with Hewlett Packard out in front again, as in December 1998, and Lexmark making its move from fourth place to third at 14.6%, up 3.5% in retail unit share compared to December 1998. The leading channels in inkjet printer sales showed consistency in December 1999 vs. December 1998: electronic specialty stores lost only a tenth of a point in unit share, finishing December 1999 at 42.2%. The combined computer specialty/office supply store channel gained about two points, ending the holiday season at 41.3%.