Last month we reported on the rather bleak fortunes of the gaming industry, and it appears as though the trend that was identified in June has carried over to July. According to the NPD Group, July marks the fifth consecutive month of year-over-year video-game sales declines. Not only is the gaming industry no longer considered recession proof, but it managed to shed a staggering 29 percent compared to the same period last year. Sales of software and hardware for July 2009 were approximately $848.9 million, down from $1.1 billion in 2008.
NPD blames the summer tailspin on lackluster new game releases, and fewer hardware purchases. The industry on a whole is expected to pick up some steam in the traditionally strong Q4 period with several high profile launches expected. "This isn't the best time of year for video-game sales. In a down economy it makes it all that tougher said Michael Gartenberg, a vice president at Interpret. "Of course, there's nothing that's ultimately going to be recession-proof if the recession goes on long enough."
“Video games have large amounts of entertainment value beyond short-term enjoyment," Gartenberg said. "That's typically one of the reasons video games have done well." Would you agree?
In November of last year, Intel's Atom processor was noted as being largely responsible for record growth in the processor market. While no more records are being broken, the processor market continues its upward climb -- to the tune of 10.1 percent in the second quarter of this year -- and once again, Intel's Atom chip is the reason why.
"The percentage of Intel's revenue earned in Asia/Pacific grew from 51 percent in 1Q09 to 55 percent in 2009," Shane Rau, director of Semiconductors: Personal Computing research at IDC, noted in a statement. "This fact, combined with the significant sequential 'snap-back' rise in Intel's overall processor shipments -- particularly Atom shipments -- while AMD's overall shipments were about flat, indicate that the PC processor market didn't recover in 2Q09."
The growth from Q1 to Q2, notes IDC, is mostly attributable to manufacturers replenishing their chip inventory rather than increased consumer demand for PCs. Predicting that most OEMs have now balanced their inventories, IDC says going forward we're more likely to see what the actual demand really is.
Intel posted its second-quarter earnings results on Tuesday. The results have come as a pleasant drizzle, if not a downpour, in this dry economic climate that has left everyone extremely thirsty. Intel recorded sales of $8 billion in the second quarter, which is $700 million more than what analysts had predicted. Although sales were down 15% compared to the same quarter a year ago, they were 12% more than the first quarter. Intel CEO Paul Otellini was very pleased by what he labeled as the company’s “strongest first- to second-quarter growth since 1988.”
Like The Little Engine That Could, the worldwide PC market kept chugging onward against all economic odds, pushed in large part by an emerging netbook market that seemingly popped up overnight. But the ultraportable PCs could only do so much to stave off the inevitable, and according to market research firm iSuppli, the global PC market will suffer its first decline in 2009 since the Dot-Com bust of 2001.
"An annual decline in unit shipments is highly unusual in the PC market," observed Matthew Wilkins, principal analyst, compute platforms for iSuppli. "Even in weak years, PC unit shipments typically rise by single-digit percentages. The last decline -- in 2001 -- was a 5.1 decrease in unit shipments due to the extraordinary impact of the Dot-Com bust, which caused inflated IT spending levels from the previous years to collapse."
The market research firm predicts global PC shipments to dip to 287.3 million units in 2009, marking a 4 percent drop from the 299.2 million shipments in 2008. Ironically enough, a growing notebook market -- which we assume also includes netbooks -- might be part of the reason for the overall drop in PC shipments. While notebook PC shipments will rise by 11.7 percent, desktop PC shipments, including entry-level servers, is expected to plummet 18.1 percent and is being cited as the "primary factor driving the decline of the PC market in 2009," according to iSupply.
The wild popularity of netbooks comes as a double-edged sword for Intel and OEMs alike. On one hand, the worldwide PC market continues to grow on the strength of netbooks, most of which sport an Intel Atom chip inside. But on the other hand, it's long been feared that netbooks would cannibalize traditional notebook sales with higher profit margins, and at least one firm says it's already happening.
According to DisplaySearch, netbook shipments will reach 33 million units in 2009, penetrating into existing notebooks by 20 percent.
"Penetration of mini-notes is one of the primary factors behind DisplaySearch’s expectations of flat Y/Y demand for notebook PCs. The other factor is a dramatic reduction in demand from enterprise customers," DisplaySearch said in a press release.
As has been talked about before, DisplaySearch said that the launch of Windows 7 in late October, if combined with economic recovery, could turn things around and lead to a "rapid recovery" in the enterprise notebook market. However, the market firm also said it doesn't anticipate this happening until sometime in 2010.
It looks like Intel's Atom platform and the whole netbook craze can only do so much to stave off slumping sales. According to market analysts Gartner Group, worldwide spending on IT is expected to drop 6 percent from 2008 to $3.2 trillion in 2009. While $3.2 trillion might not sound like much to sneeze at, the 6 percent slide is almost twice as much as Gartner predicted during the first quarter.
The biggest casualty in IT spending comes to computing hardware, which is expected to drop by 16 percent. IT services and telecom spending are on track for 5.6 percent and 4.6 percent drops, while Gartner predicts software spending growth to slow by 1.6 percent.
According to Gartner, lingering global IT budget cuts and the rising U.S. dollar are both to blame.
It has benefited greatly from being on the vanguard of the netbook revolution – Aspire One is the best selling netbook. Its streetwise, efficient sales model can also be credited for its success.
"We collect the order from the customer, place the order with the manufacturer and they ship it," Acer CEO Gianfranco Lanci told the New York Times. He added that Acer doesn’t lay its hands on the goods. Dell on the other hand has a plethora of troubles to contend with.
Just a few days ago, iSuppli said worldwide PC shipments had declined in Q1 by the "largest historic rate" since the firm has been tracking the market. But after a rocky start, the PC market could be headed for a rebound by the end of the year, says market research analyst firm Gartner.
According to Gartner, the market is on pace to ship 274 million PCs worldwide by the end of 2009. That's still a 6 percent drop compared to last year's shipments of 292 million, but better than Gartner expected, who previously predicted a 9.2 percent decline.
Going forward, Gartner says shipments will pull an about-face in 2010 and predicts a 10.3 percent growth rate. However, the firm also warned that Windows 7, available today in pre-order form at a reduced rate, isn't likely to prove a game changer for PC sales.
"Unless Microsoft mounts a major marketing campaign in support of Windows 7, we think consumers will simply adopt the new operating system as they would normally buy new PCs and/or replace old ones," Gartner Research Director George Shiffler said in a statement.
While netbooks continue to put on a strong showing, worldwide PC shipments fell by the "largest historic rate" since iSuppli has been tracking the market. Shipments only totaled 66.5 million in the first quarter of 2009, an 8.1 percent backslide from the 72.3 million shipped one year ago, and 14.4 percent less than the 77.6 million shipped in Q4 2008.
"The worldwide recession sparked by the credit crisis slammed PC shipments for the second quarter in succession during the first three months of 2009," said Matthew Wilkins, principal analyst for compute platforms research at iSuppli. "The first quarter performance of the worldwide PC market was worse than iSuppli had expected in its prior forecast, which called for a 4 percent decline in shipments compared to the same period in 2008."
Disappointing desktop sales were largely responsible for decline, which saw a drop in shipments by 23 percent. Meanwhile, notebooks actually grew 10 percent compared to the same period one year ago.
Twitter has been one of the hottest topics in the past several years, being linked to everything from potential terrorists attacks to celebrity slugfests, and even an upcoming Twitter-based reality show. Turns out it's also pretty effective marketing tool capable of boosting sales by millions of dollars.
Try $3 million, to be exact, which is how much Dell said Twitter helped the OEM rake in from followers who clicked through its posts. Of those sales, Dell made $1 million in the past 6 months alone.
"We're going to watch it over time to make sure it's tracking at the right level," said Lionel Menchaca, Dell's chief blogger. "It is trending upward and that's what we're going to be looking at overall."
Compared to Dell's $12.3 billion revenue for Q1 of this year, $3 million in sales doesn't seem like much. But no matter how much the world's second largest PC maker brings in, it's tough to scoff at millions of dollars, especially for those from the outside looking in and wondering what Twitter can do for them.