The now-confirmed recession is making holiday sales more critical than ever to telecom and other service providers, and to the communications industry overall. As reports surface that operators will cut down on capex outlays over the next year, and as mass layoffs continue to make news, the sector has reason to be concerned about future spending.
Holiday purchases serve as indicators of demand for the following year. So far, for consumer electronics companies, that’s good news since video game consoles rank among the most popular items. For carriers banking on appetites for smartphones, results haven’t been strong, although they’re not meager either. For broadband and video providers, the outlook is less optimistic. There’s no data showing an uptick in Internet access gift subscriptions and, while some customers are adding HDTV to their lineups, many residential users are canceling their premium pay TV due to belt-tightening in the weak economy.
For vendors that rely on telcos and cablecos for revenue, the forecast also is bleak. Analysts predict providers will dish out as much as 10 percent less for capex than expected. Indeed, AT&T Inc. just announced its 2009 capex will fall below 2008 levels. All of that puts companies such as Microsoft Corp. (MSFT) and Apple Inc. (AAPL) in the best position to gain from 2008’s holiday season. The rest of the communications industry, meanwhile, should dig in for the remainder of a sorry year and create strategies to improve 2009.
Black Friday and Beyond
Black Friday, the day after Thanksgiving that marks the official start of the holiday shopping season, exceeded expectations this year, even though most retailers had to discount merchandise to nearly zero-margin levels to attract buyers. Consumer electronics from Microsoft and Nintendo fared especially well. Microsoft wouldn’t provide exact numbers on sales of its Xbox 360 video game console, but did boast that it sold 25 percent more Xbox 360s on Nov. 28 than it did the same day a year earlier. Microsoft also claimed it outsold rival Sony Corp.’s (SNE) PlayStation 3 by a three-to-one margin. Sony did not release data that either confirmed or rebutted those assertions.
Nintendo, meanwhile, scored the No. 1 spot in terms of the 10 most popular products sold on Black Friday. According to PriceGrabber.com, which is part of credit rating firm Experian, the Wii Console was all the rage. The Wii Fit add-on came in at No. 5.
“Consumers are responding to aggressive promotions and price drops on popular electronics,” said Ron LaPierre, president of PriceGrabber.com.
