(Adds NPD's adjustment to percentage changes to account for
fact that January 2007 included five weeks of sales data)
By Jim Finkle
BOSTON Feb 25 U.S. retail software sales fell
last month in a sign that consumers may be cutting back on
discretionary spending as the economy weakens, an analyst with
market research firm NPD said on Monday.
Total dollar volume fell 29.5 percent from January 2007,
said NPD analyst Chris Swenson. The extent of that drop was
exaggerated because the figures tally five weeks of sales for
January 2007 versus only four weeks in 2008.
After normalizing the data, Swenson estimates that total
software sales were down 12 percent.
"I already expected lower sales in 2008 given all of the
releases we had in 2007," Swenson said. "That said, the
slowdown in the economy may be pulling down (software sales)
even further than I would have expected."
The decline is consistent with a broader trend that NPD
reported last week for the consumer electronics sector. While
sales grew last year at a healthy 6.5 percent from 2006 to a
record $129 billion, they tapered off in the second half,
particularly the last two months of the year, according to
Sales of computer equipment, flat-screen TVs, digital
cameras, MP3 players, imaging equipment and other electronics
products fell 2 percent to $9.6 billion in the crucial holiday
season, which ran from Nov. 18 to Dec. 29, NPD reported last
Swenson said that prior to crunching the January software
data, he had expected sluggish sales because of a tough
comparison with the year-earlier period, when Microsoft Corp
(MSFT.O) launched two highly anticipated products, Windows
Vista and Office 2007.
Both were released at the end of the month, but Microsoft
had pre-sold some units.
Signs of a slowdown emerged in December, when the software
industry's U.S. retail sales were up only 1.8 percent from the
previous year, Swenson said.
"Before I rush to judgment, I'd want to see several months
of a year-on-year decline in sales," he said.
November and December are generally two of the busiest
months for software retailers, though sales are also higher
than average in January and February because retailers promote
software heavily to piggyback on high demand for tax software.
NPD, which breaks the industry into eight segments, saw the
biggest percentage decline in computer games, down 52 percent
from a year ago, after normalizing the data, Swenson said.
Normalized sales were up in two of the categories. Business
software sales -- including Microsoft's Office programs for
Windows and Apple Inc's (AAPL.O) MacIntosh computers -- rose 34
Imaging and graphics products were up 9 percent after
adjusting for the differences in lengths of the two reporting
periods. Adobe Systems Inc (ADBE.O) is the dominant player in
this area, which is crowded with competitors including Sonic
Solutions SNIC.O, Microsoft, Sony Corp (6758.T) and Corel
Swenson said he was surprised that business software was
the top performer because it was in that area where the
year-on-year comparisons were among the toughest.
Microsoft recently introduced a new product for MacIntosh
that boosted business software sales, he said.
Education software sales declined an adjusted 12 percent,
finance software edged down, dropping 0.1 percent, Swenson
Sales of "personal productivity programs" -- including
software to handle a wide range of tasks, from burning CDs to
drawing maps -- fell 26 percent.
Sales of anti-virus programs, backup software and other
utilities that help maintain and repair computers were down 8.4
percent. That category includes widely used software from
Symantec Corp (SYMC.O), McAfee Inc MFE.N and Trend Micro
(Reporting by Jim Finkle; editing by Jeffrey Benkoe, Braden
Reddall, Richard Chang)