Notebook Computer Sales Droop : Marketing: The fourth-quarter slump follows a surge in the hottest category of the PC industry. Too much inventory and high prices are two of the problems.
Demand for notebook computers has slackened in recent months, dashing computer companies’ hopes that the hottest category of the personal computer industry would carry them through the economic slowdown.
As recently as October, analysts and company executives at the Comdex computer trade show in Las Vegas were predicting that notebook computer sales would be immune to economic woes. But now many say that was a false hope.
“We’ve definitely detected a slowdown in the notebook market in the fourth quarter,” said Bruce Stephen, computer analyst at International Data Corp., a market research firm in Framingham, Mass. “A lot of vendors jumped in the market and now there is too much inventory.”
Notebook computers weigh from 5 to 8 pounds and are small enough to fit in a briefcase while packing the power of a typical desktop computer. They have been popular with traveling executives and salespeople.
Sales of disk drives for notebook computers are expected to be up to 20% lower in 1991 than earlier forecasts, according to IDC. Notebook computer sales are expected to reach $1.4 billion this year, or about 8% of the overall PC market.
Safi Qureshey, co-chairman of AST Research in Irvine, said sales of notebook computers are slow in the current quarter compared to the previous three months. And that’s despite price cuts of 30% on AST’s notebook machines.
“There was a surge in the market, and now it has slowed down,” he said. “We never thought the notebook market would take over the world, but it is a valid market.”
Other market leaders, such as Irvine-based Toshiba America Information Systems, Compaq Computer and Dell Computer, have responded to the slowdown by trimming their prices.
Despite the cuts, notebook prices are still too high to entice some consumers to buy them as an alternative to comparable desktop models. Notebook prices range from about $1,500 to $4,000.
“There will be a lot of unsold product coming back from retailers in the first quarter,” said David Dukes, president of Ingram Micro, a computer distributor in Santa Ana. “That might be when we see some companies falter.”
For consumers, however, that could mean that a lot of bargain-priced notebooks with fewer features will hit the market early next year. But prices for the newest notebooks with the latest technology will probably top $3,000.
Not all notebook manufacturers are seeing slowing demand. Apple Computer, for example, has enjoyed strong sales of its notebook computers since entering the market in October. The notebooks have proven enormously popular, mainly because of pent-up demand among Macintosh users.
Apple’s entry will help pump the notebook market to 1.1 million units in 1992, up 64% from 668,000 in 1991, IDC’s Stephen estimates.
“That is a big growth rate compared to a flat desktop market, but people were expecting much bigger volumes a lot sooner,” Stephen said.
Toshiba America’s computer division, which recently unveiled several new products and expanded its distribution, is experiencing healthy growth in notebook sales this quarter, said Grant Johnson, director of product marketing.
“We wouldn’t disagree with the analysts who say earlier estimates were overly aggressive,” Johnson said. “For lagging desktop companies, this market is not going to be a salvation.”
It wasn’t long ago, however, that many computer companies--faced with shrinking sales of desktop machines--viewed the notebook field as a lifeline. That belief prompted dozens of companies to enter the market; there are now 60 manufacturers of notebooks.
A year ago, many of those manufacturers could not obtain sufficient supplies of key components, such as disk drives and display screens. But those problems are largely resolved, and now the supply of notebooks is outpacing demand.
In the past three months, 17 companies have begun manufacturing disk drives for notebook computers, said Kathryn A. Braun, executive vice president at Western Digital in Irvine. A year ago, only one company--Conner Peripherals in San Jose--was supplying that type of disk drive.
Many customers may be waiting for a raft of new products expected to premier in early 1992, said Steve Lair, a vice president at Dataquest, a San Jose market researcher. The new products will feature faster processors or color display screens. International Business Machines is also expected to weigh in with a new notebook line in February.
“There’s a lot of confusion out there, and if you add it all up, people say they can wait for a quarter,” Lair said. “Companies will have to offer new technologies if they want to grow.”
The Notebook PC Market
Makers of notebook computers are scrambling to retain market share as sales slump.
Percentage of Market Share Toshiba: 23% Texas Instruments: 7% Hewlett Packard: 4% Dell: 7% Compaq: 23% AST: 17% Other: 19%
