PC firms hope for holiday cheer

PC makers may find reason for cheer this holiday season, with expectations running high that Christmas sales will fare better than last year's disappointing numbers, industry analysts say.

International Data Corporation today said it expects worldwide fourth-quarter sales to grow 17 percent over those a year ago. They also expect 1996 to end 18.5 percent higher than the previous year.

That's good news for an industry that stuffed their distribution channels with low-priced computers last Christmas only to find that consumers were looking for higher-end lines. The resulting oversupply has made PC makers cast a more cautious eye to this year's market, IDC analyst Kevin Hause said.

"PC makers are now staying in close contact with retailers and vendors to find out where the sweet spot will be in the product mix. By mid-November, they should have a good idea of how things are shaping up and will ramp up quickly," he said.

Although inventory in distribution channels have been reduced, it does not necessarily translate into higher sales at the retail stores--it will only effect inventory should demand not materialize. But with high consumer confidence and a healthy economy, sales will likely be performing well this season, IDC analyst Bill Zinsmeister said.

But not everyone is likely to partake in the holiday merriment. Maureen McGrath, an analyst with Smith Barney, said retail stores that specialize in computer products, such as CompUSA and Computer City, will probably perform well, but she added that major electronics retailers such as Circuit City, Best Buy, and Good Guys may not be able to assess consumer demand correctly.

"It's not their primary business, and that's what created the difficulty for them," she said.

The performance in the fourth quarter is expected to fare better than that in the third. IDC reported third-quarter PC shipments, though steady with double-digit growth, is the slowest it has been in five years. Dataquest, which also released its third-quarter PC shipment report today, said Compaq Computer continues to lead the PC market with 10.3 percent market share. Both research firms report that third-quarter shipments grew 16 percent over a year ago.