Tag Archives | Economy

Circuit City Closes Up Shop Once and For All

Posted by Harry McCracken on January 16, 2009 at 10:11 am

Circuit CityIt’s hardly surprising, but now it’s official: Troubled consumer-electronics merchant Circuit City has failed to find a buyer and will therefore be liquidating all its stores. It’s lousy news for its more than 30,000 employees, its stockholders, and anyone who was a fan of the chain, which started with a single store six decades ago.

Even if the U.S. economy was in better shape, the odds were against the company–and, for that matter, anyone else who tries to operate a big chain of electronics stores. Far more of them have folded over the years than have ever been viable businesses. Running successful retail stores is by definition really hard, and the intense price competition among gadget sellers makes squeezing out a profit incredibly tough.

Even so, Circuit City’s death strikes me as largely self-inflicted: For too long, its stores were joyless places with limited selections, uncompetitive prices, and mediocre customer service. It even had an organized program to fire staffers who were experienced enough to know what they were doing and replace them with clueless, low-clost newbies.

With Circuit City’s imminent disappearance, the country is really left with only one nationwide full-service electronics chain, Best Buy. It’s long played Gallant to Circuit City’s Goofus, and should ride out the recession in decent shape. Other electronics purveyors are specialists (RadioShack), generalists with an electronics department (Wal-Mart, Target), regional (Fry’s, the current incarnation of CompUSA), or willfully limited in number of locations (Micro Center). Or, of course, completely virtual (Amazon.com, Buy.com, etc., etc., etc.).

Among the reasons I wish that Circuit City had made it is this: It would be a lot better for consumers if there were at least two strong national chains competing to win customers through broad product selection, low prices, and decent service. Best Buy has enough competition and challenges on other fronts that I don’t expect it to grow too fat and happy, but it no longer has to worry about its most direct rival.

Of course, if Best Buy’s management is smart–and it is–it’ll continue to run scared. Jim Collins’ business bestseller, Good to Great–published in 2001–lavishes praise on Circuit City as one of the country’s best-run companies of any sort. It took Circuit City only eight years to go from glory to death. Bottom line: Best Buy could be dead in a decade too, if it doesn’t make its customers happy…

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A Little Less Lenovo

Posted by Harry McCracken on January 8, 2009 at 8:34 am

LenovoThe crummy state of the economy continues to bring crummy news for the tech industry: Lenovo announced today that it’s letting 11 percent of its workforce go as part of a broad restructuring. It’s also reducing executive compensation by 30 to 50 percent (sorry, guys!).

Buried in its press release is one tidbit that might be a plus for Lenovo customers: It’s relocating its customer-support call center from Toronto to Morrisville, North Carolina, the company’s main North American site. If this involves Toronto staff losing their jobs, it’s regrettable for the folks who are impacted. But I’m a big believer that tech support staffers provide the best help when they work most closely with the rest of a company’s team. And it’s good to see that Lenovo isn’t reacting to economic pressures by relocating tech support to another country where language issues could stand in the way of solid tech support.

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OLPC Slashes Staff, Refocuses Mission

Posted by David Worthington on January 7, 2009 at 8:01 pm

olpcJust weeks after administering its “Give One, Get One” holiday season drive, the One Laptop Per Child (OLPC) foundation has cut its staff by 50 percent to downsize its operational costs. But the news is not entirely grim: OLPC has announced several new technology initiatives.

In a blog posting, founder Nicholas Negroponte explained that as a non profit, OLPC is bearing the brunt of the worldwide economic downturn. It has reduced its team down to 32 people, and the remaining personnel have reduced compensation. With luck the person that produced the foundation’s creepy John Lennon ad wasn’t spared the pink slip.

Negroponte reaffirmed the organization’s commitment to its mission of providing children in developing countries with laptops. To that end it will embark on several new technology initiatives. Those include:

1. Development of Generation 2.0 of the XO laptop
2. A no-cost connectivity program
3. A million digital books
4. Passing on the development of the Sugar Operating System to the community.
5. Creating a $0 laptop to be distributed in the least developed countries.

The foundation will also change its deployment strategy, targeting Afghanistan and Northwestern Pakistan, the Middle East, and sub-Saharan Africa. Further, it is restructuring its Latin America operations into a separate support unit.

500,000 children have already received laptops, according to OLPC. Computer literacy plays a role in economic development, and the foundation’s work should continue. Let’s all hope it rides out the downturn.

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Semiconductor Sales Decline Slightly in 2008

Posted by David Worthington on January 2, 2009 at 5:24 pm

The Semiconductor Industry Association, a trade group comprised of computer, device, and chip makers, is reporting that chip sales dipped to $20.8 billion in 2008 from $23.1 billion in 2007, New York Times is reporting. It’s yet another sign of the U.S. economy’s fragile condition. But the “glass is half full” part of my brain can’t ignore the fact that sales are still brisk.

We already knew, of course, that businesses and consumers are spending less on IT. It makes perfect sense that non essential capital expenditures would lower: you can’t eat silicon. Innovations in technology can give businesses an edge, but when it comes time to tighten the belt, it is better to delay buying new workstations or BlackBerries for interns than it is to cut advertising or hand out pink slips. Consumers can afford to wait another year for the latest and greatest gadget.

There could be other contributing factors. Aside from the economy, the industry is on the downward edge of a sawtooth. I’m not going to buy a new computer today unless I have to, because OS X Snow Leopard and Windows 7 aren’t out yet. Many consumers are informed enough to know that they may want to hold off purchases for those releases.

While it is widely accepted that 2009 will be a difficult year economically, that does not mean that every sector of the economy will be affected equally. The IT industry is not the automobile industry–let’s not panic because one report tells us what we already anticipated.

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Happy New Year Microsofties, Here’s Your Pink Slip?

Posted by Ed Oswald on January 1, 2009 at 1:26 am

Happy New Year Technologizer readers. Of course we have to start 2009 off right with some fresh layoff rumors from the world of tech, and this time it’s coming from Redmond.

Yes, Microsoft. The one who likes to point out it never lays people off (well at least officially). It’s no small pruning either: anywhere from 10 to 17 percent of the company’s workforce will be let go–or so the scuttlebutt says.

Pink slips are set to be handed out January 15 if you believe what’s being written, which would put it a week before the company announces its quarterly earnings.

The company is declining to comment on the reports, calling them “rumors and speculation.” Nobody seems to have any way to confirm it either, so I guess we’ll have to wait for folks to begin walking out of their offices with cardboard boxes in tow. If they indeed do.

We’ll probably find out sooner than that, however, as Microsoft is mandated by securities law to inform stockholders of actions that may affect its stock price within 24 hours.

Blogger Mini-Microsoft seems to think that layoffs may not be in the cards, however at the same time he seemed to suggest that the pullbacks might come in another way, such as reorganizations, phasing out of projects, and the like.

I guess we’ll see what happens, no?

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Michael Dell Targets Executives with Layoffs

Posted by David Worthington on December 31, 2008 at 6:26 pm

Dell logoHey dude, you’ve got a golden parachute. Dell Computer founder Michael Dell has fired the executives that he handpicked to turn the financially ailing PC manufacturer around when he returned as CEO in 2007, and may target lower level executives next, according to press reports.

The reports indicate that Michael Cannon, who has served as president of global operations and had responsibilities for streamlining manufacturing operations, will assume another role. Mark Jarvis, Dell’s chief marketing officer, is out. The duo received a combined US$22.8 million in compensation.

Until now, the company has asked its rank and file employees to bear the brunt of its cost savings. Employees were asked to take unpaid days off in November. Around that time, the company also began to charge customers a monthly fee for premium support.

While the company’s stock value has plummeted, it has remained profitable; albeit less profit than it was two years ago. It has assumed more debt, but its overall financial health is okay.

A Datamonitor Industry Market Research report from Apr. 2008 has Dell with a 8.1% share of the global computers & peripherals industry. Without having to play around with ratios, I’m confident that the company is not going under any time soon. When the world economy turns around, so will Dell–provided it has competent people in charge of its marketing and operations.

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comScore: Black Friday Online Sales Up 1%

Posted by Ed Oswald on December 1, 2008 at 10:23 am

The US’s biggest retail shopping day of the year turned out fine after all, although the results were likely nowhere near as good as investors would have liked. While data shows brick-and-mortar retail sales were up 3 percent, online sales rose only 1 percent.

comScore says that $534 million was spent by consumers online on Friday, likely attracted by better-than-normal deals being offered by desperate retailers. There was some crazy deals: the Epson store offered its R280 photo printer for $29.99, a $70 savings.

Traditionally, heavier online shopping comes today, known as “Cyber Monday.” This is basically due to the fact that as people return to work, they use their downtime to further complete their holiday shopping. It has also been perpetuated by online retailers, which have begun to offer special deals just for the day.

Looking around, there’s not as many deals this year, although Best Buy has its own special page as does competitor Circuit City. comScore says to watch the growth for Cyber Monday: typically it has come within a few percentage points of the overall holiday season growth for online shopping.

If comScore is right, expect that number to be flat. The firm says it sees no growth year-over-year for online shopping.

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eBay Struggles, Pageviews Declining Significantly

Posted by Ed Oswald on November 25, 2008 at 2:12 pm

ebaylogoNext time you hear some media talking head claiming that hurting consumers are running to eBay in droves for better deals, you can call their bluff. Nielsen released data that shows the auction site is continuing to lose eyes as the economy worsens. The data shows a precipitous drop off beginning in September, right around the time the US economy really began to tank.

eBay saw its some of its best times late last year, averaging around 13.5-14.5 million pageviews per month during the holiday season. However, after those good times, the auction site began a essentially steady decline.

You can almost see the point when consumers began to panic. August shows about 11 million pageviews, but by September that had fallen to 9.4 million. October was even worse, ending at about 9.1 million pageviews. The August to September drop was the largest decline outside of the normal post-holiday slump in two years of data.

Now forgive me here — I am no math major — but I’m going to do some number crunching. Using last holiday as a guide, it looks like we can expect about a 10% or so bump up for the holidays. Even if this occurs, eBay’s traffic would be down about 20-30% year over year. This seems about right — October’s traffic numbers were down a third from last year.

The economy may not be the only reason here. Silicon Alley Insider (which I think goes a bit overboard with the title, it is not that bad yet) surmises that stronger competition as well as the fact that eBay’s value proposition isn’t as great is also helping to accelerate the decline.

I’d agree with this: eBay has become less of a bargain these days. I’m noticing that more and more items look like a good deal at first glance, yet the money’s being made elsewhere, whether through “handling” charges, or obviously inflated shipping costs.

eBay’s not helping either, alienating some of its sellers by tinkering with its selling fees far too much.

For those of you that like pretty little charts, I’ve included this data graphically after the jump.

Continue Reading →

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Confirmed: Cisco Shutting Down For Four Days

Posted by Ed Oswald on November 25, 2008 at 10:25 am

Cisco logoTechnologizer has confirmed claims by UBS Research that Cisco is preparing to shut down for four days at the end of this year in a likely effort to cut costs. It would be the first time in the company’s history, and probably means things in Silcon Valley are worse than we think. The information comes from an employee within the company.

Add to this some details from Om Malik, who claims that an “major annual internal event” has also been postponed, and you must begin to question how well Cisco’s doing. Altogether, the effort would save the company about $1 billion. (Our source says he knew nothing about any event cancellations).

This is in addition to a hiring freeze and cutback of non-essential events as part of a broader plan to save money in 2009. With such uncertainty, that is probably a good idea.

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iSuppli Slashes PC Sales Outlook for 2009

Posted by Ed Oswald on November 20, 2008 at 2:48 pm

Next up on the bad tech economy news parade: iSuppli. The analyst firm sent out an advisory Thursday indicating that it was reducing its PC unit shipments forecast for growth by a stunning two-thirds. The reason? You guessed it, the economy.

The changes mean that instead of the 11.9 percent growth it had projected back in September (with the way things have been changing so rapidly, that now seems like an eternity ago), it now sees only 4.3 percent growth in 2009. iSuppli has also revised down its forecast for 2010, although it does show some improvement over 2009 nonetheless: 7.1 percent growth, down from its earlier forecast of 9.4 percent.

Analyst Michael Wilkins directly mentions the credit crisis as having a large impact on larger-ticket purchases like PCs, and its hurting the consumer as well as the enterprise.

“The result of the financial turmoil is less money to spend, and often that money is itself more expensive,” Wilkins said. “With less money to spend, application markets, like PCs, have been impacted.” All in all, we shouldn’t really complain. The PC market has had solid growth for the past five years, growing at double digit rates. 2008 was to be the sixth straight year, but now it appears as if that will not happen.

Regardless of market conditions notebook PCs should still manage to post growth, up 15 percent this year. Desktops on the other hand will continue to see shrinking sales, down five percent from 2007.

No word from either Gartner nor NPD, which also produce PC sales forecasts on whether they’ll be doing some face-saving by tamping down growth numbers a bit.

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