The reeling personal computer market, whose fortunes turned sharply downward last holiday season, is showing some signs of life this season.
Since Thanksgiving, retailers and analysts say, personal computer sales have risen modestly alongside better-than-expected sales of home-entertainment equipment, such as DVD players, high-definition televisions and video game consoles.
When it comes to buying electronics, consumers have shown some resilience in the face of the first recession in a decade, the Sept. 11 terrorist attacks and the war in Afghanistan. Hewlett-Packard, the top-selling PC vendor in stores, reported last week that it had sold 20 percent more computers during the Thanksgiving weekend, the start of the holiday buying season, than during the same weekend last year.
But the mild surge in personal computer and electronics sales -- in stores, on Web sites or through direct-sales businesses like Dell Computer -- may speak less to improving demand than to the desperation of the computer makers themselves.
Because most people who want a PC already own one that can handle their needs, computer makers and retailers prepared for the holiday by rolling out heavy price cuts and rebates. At some stores, including a Best Buy in Indianapolis, 75 percent of computers on sale included rebates, according to a retail survey by the investment bank Bear Stearns & Co. The incentives are an effort to encourage upgrades to faster machines and purchases of second or third computers for the home.
But despite the resulting bump in sales, many say the PC industry will continue to founder for at least another half-year, until corporations that buy large numbers of machines loosen the purse strings on their technology budgets.
"The PC business is in the doldrums, and I think it's likely to stay in the doldrums," said Steven Baker, a research director with NPD Intelect, a market research firm based in Port Washington, New York.
After riding the Internet wave through the third quarter of last year, computer makers have watched their sales fall steadily ever since. The industry is expected to decline this year for the first time since 1986. While the number of computers shipped this holiday season will nudge up slightly from last quarter, cutthroat price competition will drive revenue down about 1 percent, said the International Data Corp, a market research firm based in Framingham, Massachusetts.
Of the major vendors, only Dell, with its built-to-order direct-sales model, is expected to turn a profit on its PC business. Dell has led a pricing war that has caused its competitors to struggle. Last week, Toshiba, which holds less than 1 percent of the market, announced that it would stop selling its desktop computers in the US.
For vendors, the problem is that most computers in homes and offices are powerful enough to do their jobs. Corporations bought scores of new machines in fear of a Year 2000 meltdown, and, with the economy shrinking, they are in no hurry to upgrade now. And on the homefront, many PCs can handle e-mail, word processing and Internet browsing just fine.
So instead of buying new computers, consumers are tempted to spend money on new ways to use the computers they already own: digital cameras and video recorders, broadband Internet connections, and digital music players and rewritable CD drives.
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