Business Buyers Key to Holiday Computer Sales

The personal computer business is all dressed up for Christmas, and December looks like a good month for sales. But it might have more to do with Uncle Sam than with Father Christmas.

Retailers and analysts expect sales of personal computers in the fourth quarter to climb at least 20% above the year-ago mark. The major impetus for the gain, however, will come from business owners rushing to buy equipment in order to qualify for 1985 tax credits.

“They’ll probably sell plenty of computers, but they won’t be under the Christmas tree,” said Efrem Sigel, publisher of Communications Trends in Larchmont, N.Y., which tracks computer advertising outlays.

Christmas always has been the best time of year in the personal computer business, and the fourth quarter has long accounted for a disproportionate share of the year’s sales. This year won’t differ drastically. But the continued flatness in sales of computers for personal use has made Christmas itself less of a factor in the industry’s sales picture, says William Ablondi, vice president at Future Computing, a market research firm in Dallas. He attributes this to consumers’ well-documented doubts about the computer’s usefulness at home.

Ablondi projects that home computer sales will actually decline slightly, to $1.7 billion from $1.8 billion, in the current quarter from the same period last year. But office sales, he says, will leap by one-third to $4.4 billion from $3.4 billion--most of it in December.

If sales are slower on the home front, it won’t be for the industry’s lack of effort. Like last year, industry leaders IBM, Apple and Commodore are undertaking major advertising campaigns and already are cutting prices.

Software firms that have survived the industry shakeout are thriving on the holidays: Electronics Arts, which develops game programs, says fourth-quarter sales are running 50% ahead of last year.

At the 234-store Toys ‘R’ Us chain, sales so far of computer-related products are modestly higher than last year, a fact that Kip Power, Southern California regional manager, attributes to price cuts. One pleasant surprise is Coleco Industries’ discontinued Adam computer, which is selling better than last year, Power reported. Strong sales of Commodore’s new C-128 computer is the other major bright spot.

PCjr for $650

Powers and other retailers said that whatever strength is shown in home sales will result from discounting, including on such discontinued products as the Adam and IBM’s PCjr. A complete PCjr system can be had for about $650, while a fully equipped Adam is running $299. Apple has slashed prices by 10% to 35% on the Apple II line and its Macintosh.

“Discounting has made a lot of these products sell. That has accounted for our increase,” Power said. “Last year was down from the previous year. We’re not back up to the peak level, and I don’t anticipate that we will be.”

One theory for the ongoing weakness in sales of computers for strictly personal or family use is that the public came to expect more than the computers could deliver. Boosters of such new machines as Commodore’s Amiga, said to represent a major advance in affordable graphics and sound capabilities, claim that it will reignite the home market--but not this Christmas.

Financially troubled Commodore just began shipping the Amiga to dealers this fall, and it is generally agreed that there aren’t enough machines or software programs available to make a big dent in the Christmas season--notwithstanding the company’s $40-million advertising campaign.

“This will be the last great Apple II Christmas,” said William (Trip) Hawkins of Electronics Arts. He was referring to Apple’s venerable II line and most other established personal computers, which he considers outdated.

For his part, Apple Chairman John Sculley says the company will sell “at least as much product” this Christmas as last with the advertising message “Buy the computer your child uses at school.” Sculley took a swipe at Commodore and its dazzling technical ads for the Amiga, remarking that such ads “come from companies whose products have limited software and where the company’s financial health is far from strong.”

Despite the price cutting on IBM’s remaining PCjr machines (the company quit building them this year), analyst Ablondi expects fourth-quarter sales of just 60,000, less than one-third the sales of a year earlier, because of public awareness that the PCjr is an “orphan.” IBM says only that it has enough inventory to meet demand; a spokesman called the PCjr “a fourth-quarter machine.”

A new computer that straddles the home and business markets, the Tandy 1000, is expected to enjoy a good holiday, also thanks to aggressive pricing. A rough equivalent of the IBM PC with some office limitations but better graphics, the machine with a color monitor can now be purchased for $999. Tandy projects a 10% overall sales gain for computers sold through its Radio Shack stores.

“I’ve got a feeling one of the big winners this Christmas is going to be the Tandy 1000,” said analyst Dave Fradin of Dataquest, a San Jose market research firm.

But the biggest winners in the personal computer business this season will still be those who cater to office and commercial customers--whose pocketbooks are deep and whose Christmas spirit is irrelevant.

Noting the year-end deadline to qualify for investment tax credits and equipment depreciation, office automation consultant Amy Wohl of Bala Cynwyd, Pa., projects a “distinct fourth-quarter kick” in buying by businesses. Spurred by new products, she predicts an “even bigger sales kick” in the first six months of 1986.

Dollar Sales Expected to Rise

Largely because of sales to business, dollar sales of personal computers in the fourth quarter will surge by anywhere from 29% to 48% over last year, Dataquest’s Fradin said, even though the number of machines sold will be flat or up only modestly. He cites the introduction of several powerful and expensive personal computers by such major commercial-oriented companies as AT&T;, Hewlett-Packard, Sperry, Honeywell and Wang for the rise in dollar sales.

“Our sales are up,” reports Barry Obran, marketing vice president of Businessland, the 65-store computer retail chain that sells IBM, Compaq and the Apple Macintosh models to medium-size and large businesses. He adds that, despite aggressive pricing, overall dollar outlays are rising because customers are buying more complete and costly systems or networks of computers.