Great new products - bad timing
8/31/2012 9:00 AM EDT
Just when it appeared the stars were aligning for a revolution in computing, the future became cloudy. The pending release of Windows 8 is set to usher in a new era of computing with an entirely new applications environment, touch interfaces for both desktop and mobile PCs, and the choice of processor architectures for PCs and mobile devices.
Unfortunately, the global economy is facing a European recession, slowing growth in developing regions, and slower growth in the US exacerbated by political uncertainty. In fact, year-over-year sales of consumer electronics, especially PCs, have already decreased in 2012.
Some of the downturn in electronic sales can be attributed to upcoming software and hardware product releases from Apple, Microsoft, and a plethora of OEMs, but how much is difficult to determine. The new iPhone, iPad, ultrabooks, and a slew of new products are slated for release throughout September and October, which should help sales in Q4, but even a 10 percent to 15 percent increase over traditional season averages would do little to salvage sales for 2012 and that’s if the new products drive market demand.
There is little doubt that the Apple faithful will flock to stores in Q4 for the new Apple products driving a quarterly bump in Apple sales, but demand for the new Microsoft-based products is questionable because of the higher prices OEMs plan to charge for the new products.
The legacy of the PC and consumer electronics industry is that charging higher prices for new form factors and features often leads to slow and disappointing sales growth. Consumers have come to expect improvements for the same or lower prices than the previous generation. Many of the ultrabooks and desktop PCs are already being priced at up to 2X the prices of the average 2011 holiday prices for mobile and desktop PCs. Granted, the cost of building the devices is higher in some cases, particularly for the touch screens. However, justifying these price increases to consumers is difficult, if not impossible, especially when economic concerns weigh on their minds.
There is little doubt that pricing of the new devices will quickly become very aggressive. Amazon and Google have already set the bar for tablets and competitors are finding it difficult to breach the $200 price point. The same is likely to happen for the new generation of PCs, but likely not before the end of the year, leaving retailers and OEMs with a surplus of unsold holiday inventory and an uncertain outlook for 2013. This could send shutters throughout the electronics industry, while consumers are likely to see fire-sale prices toward the end of the holiday season on into Q1.
In the past, PCs and electronics have often been immune to the economic swings due to the growing influence of electronics in the lives of consumers and global expansion, but as the industry grows as a percentage of the global economy, it has become more aligned with the economic swings. The new technologies and products being introduced will usher in a new era of computing and consumer electronics, but the timing does appear to be very unfortunate.