Reading the tech tea leaves via Best Buy, Circuit City

Summary:Best Buy and Circuit City each reported earnings and provided some color on the technology sector's health. Key takeaways: Vista demand seems fairly strong and flat-panel TV prices are crumbling.

Best Buy and Circuit City each reported earnings and provided some color on the technology sector's health. Key takeaways: Vista demand seems fairly strong and flat-panel TV prices are crumbling.

Comparing Best Buy and Circuit City is a bit of apples and oranges. Best Buy is the class of electronics retailing and Circuit City is a mess. For instance, Best Buy reported fiscal 2006 net income of $1.37 billion. Circuit City lost $11.8 billion.

However, both companies' financial statements do provide key indicators. Here's a look at the main items and the bottom line.

Vista demand (see blog focus and reviews).

Best Buy:

"Home office products, which accounted for 27 percent of fiscal 2007 fourth-quarter revenue, were steady with a comparable store sales increase of 0.2 percent. Contributing to the results was the launch of Microsoft's Vista operating system, which accompanied double-digit comparable store sales increases for notebook computers and computer services."

Circuit City:

"Our PC hardware business experienced volatility around the Microsoft Windows Vista operating system transition. PC hardware posted strong sales growth in both December and February, but January sales were impacted as we kept PC inventories lean in advance of the transition."

Takeaway: Vista demand appears to back up Microsoft's recent statements, but Circuit City blew it by not having enough products in the store.

Flat-panel TV prices (reviews).

Best Buy:

"Consumer electronics, which represented 46 percent of fourth-quarter revenue, posted an 8.5-percent comparable store sales gain. Within consumer electronics, flat-panel TVs experienced a strong double-digit comparable store sales gain as declining prices led to higher volumes and increased screen sizes. Total television comparable store sales grew by double-digits as flat-panel TV growth was partially offset by declines from tube and projection TVs."

Circuit City:

"During the quarter, flat panel television average selling prices were well below the prior year...In the video category, Circuit City produced a low-single-digit comparable store sales decrease in the fourth quarter. Total television comparable store sales were approximately flat compared with the prior year period, as double-digit comparable store sales growth in flat panel televisions was offset by double-digit comparable store sales declines in projection and tube televisions."

Takeaway: It's a good time to buy a flat-panel TV and many folks are upgrading to high definition sets. Of course, 6 months from now the timing will be even better. Best Buy said "it believes it gained significant market share in electronics, particularly flat-panel TVs, due to successful promotional strategies."

Desktops (reviews) and printers (reviews).

Best Buy:

"The gains from notebook computers and computer services were nearly offset by declines in comparable store sales of printers and desktop computers."

Circuit City:

"In the information technology category, Circuit City produced a low-single-digit comparable store sales increase in the fourth quarter. Comparable store sales in PC hardware increased by low-single digits as a double-digit increase in notebook computers was partially offset by a high-single-digit decline in desktop computers."

Takeaway: Nothing too surprising here. Desktops are so last century. Best Buy's printer comments are worth noting for future reference.

Topics: Hardware

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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