CORRECTION: A January 3 article incorrectly reported the number of weeks of inventory projected for Apple at the end of December by Matt Sargent, an analyst for market researcher Associated Research Services Inc. (ARS). Inventory levels at the end of December should be approximately eight to nine weeks. Price cuts, which took affect on a limited number of Macintosh products January 2, should help drop levels by the end of January to six to seven weeks, Sargent said.
Despite holiday sales being some 15 percent worse than Windows-based PCs, estimates by a leading market research firm are putting Apple after-Christmas product inventory between eight to nine weeks — much less than the 11.5 weeks reported at the first of December. If the projection holds true, it would be a sign that Apple is slowly hacking away at an inventory problem that has plagued the Macintosh-maker since October.
“I think Apple will close out (December) with about eight to nine weeks of inventory,” Matt Sargent, an analyst for market researcher Associated Research Services Inc. (ARS) told MacCentral. Sargent cautioned that his estimate “could be less and could be more.”
Sargent commented that inventories will probably be around six to seven weeks by the end of January as a result of the January 2 price cuts.
Sargent said his numbers are based on other reports of overall slow Christmas PCs sales, the positive effects of Apple rebates and the halt in production of certain out-going models. “All that together, inventory levels should be lower,” he said. “But I don’t want to give the impression that even at six to seven weeks of inventory (at January’s end) that the situation is good. It is not.”
A number of published reports gave the impression that Apple’s current inventory level is now 11.5 weeks. Sargent reiterated that number is through the end of November only and doesn’t reflect sales for December, which will not be tabulated until later this month. Apple is expected to release its inventory numbers for the end of January during its fiscal first quarter earnings conference call on January 17.
As analysts wait for final inventory numbers, preliminary retail sales data for the first three weeks of December show PC sales were far from meeting expectations. Apple sales plummeted 40 percent during the period, Steve Baker, an analyst with market researcher PC Data, told MacCentral. “That compares to Windows-based systems being down about 25 to 30 percent,” Baker commented.
“A 40 percent drop for Apple at Christmas looks big, but the fact is everybody was down,” Baker said. “Because Apple has a more limited audience than Windows-based systems, their numbers always look worse. I think you have to say Christmas was a bust for everyone in the PC industry.”
Total sales of desktop computers in retail stores and direct/mail companies declined by approximately 24 percent in December, according to PC Data preliminary results. In December, retail and direct/mail channels sold slightly more than one million desktop PCs. For the year 2000, unit sales of PCs, sold through storefront retailers, direct/mail resellers and Internet resellers, were down 0.8 percent to 10.1 million units, the first annual decline ever reported by PC Data. Retail PC revenue in December fell to US$855 million, down almost 30 percent from 1999.
Kevin Knox, an analyst with the Gartner Group, told MacCentral there were two things different about Christmas 2000 compared to a year ago: In 2000 PC makers didn’t refresh their lines right before the holiday season as they did in 1999 to be ready for year-2000 compliant standards and consumers had more electronic choices such as PDAs, printers and digital video cameras.
PC Data reports sales of handheld devices, including Palm, Visor and Pocket PC more than doubled in November before the surge of the Christmas buying season versus 1999. Other categories showing healthy revenue increases in November over 1999 were MP3 players (400 percent); Web PC cameras (68 percent); CD burners (65 percent); blank CDs (32 percent); digital cameras (26 percent); and mice (15 percent).
“Let’s not forget the economy softened very quickly beginning in mid-November,” Knox said. “That had a profound affect on PC sales that I don’t think anybody expected to be as bad as it turned out.”
Despite the poor December sales, Baker believes the overall computer products business still looks like a good place to be in 2001. “We anticipate that computer retailers will see a 10 to 12 percent increase in revenues for 4th quarter, driven by the digital upgrade cycle as consumers shift purchases away from PCs and into the new ‘digital toys’ of the 21st century,” Baker said.
Apple’s inventory problems are expected to contribute to a projected fiscal first-quarter loss of between US$225 million and $250 million, Apple Chief Financial Officer Fred Anderson told analysts December 6. Apple also sees fiscal 2001 revenue coming in between $6 billion and $6.5 billion, down from the $7.5 billion to $8 billion forecast previously.
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