Guests are silhouetted at the launch event of Windows 8 operating system in New York, October 25, 2012.

LAS VEGAS | Thu Jan 10, 2013 9:28pm EST

LAS VEGAS (Reuters) - Holiday-season sales of personal computers fell for the first time in more than five years, according to tech industry tracker IDC, as Microsoft Corp's new Windows 8 operating system failed to excite buyers and many instead opted for tablet devices and smartphones.

The slump caps a miserable year for PC makers such as Hewlett-Packard Co, Lenovo Group and Dell Inc, which saw the first annual decline for more than a decade with no immediate signs of relief.

It underscores an unspectacular launch for the latest version of the Windows franchise, which Microsoft is banking on to fight off incursions into the PC arena by touch-friendly devices such as Apple Inc's iPad.

"The sense is that until Windows 8 is fully installed and prices start to come down, we will be in this state of negative dynamics in the PC market," said Aaron Rakers, an analyst at Stifel, Nicolaus & Co.

Still, analysts warn against counting out Windows 8 -- the most radical change in the operating system in 20 years -- as consumers grow more comfortable with its tile-based interface and touch features.

In the past, a new operating system from Microsoft tended to stimulate a spurt of PC sales, but PC makers simply did not get enough attractive machines into the market, said IDC.

"Lost in the shuffle to promote a touch-centric PC, vendors have not forcefully stressed other features that promote a more secure, reliable and efficient user experience," said Jay Chou, senior research analyst at IDC.

This year could be better, he suggested, even in the face of talk about the death of the PC as tablets are on track to outsell full-featured machines for the first time in the United States.

"As Windows 8 matures, and other corresponding variables such as Ultrabook pricing continue to drop, hopefully the PC market can see a reset in both messaging and demand in 2013," said Chou.

PC makers sold 89.8 million units worldwide in the fourth quarter of last year, down 6.4 percent from the same quarter of 2011. That was slightly worse than expected by most, and the worst performance for more than five years, when the global economy shuddered to a halt and ushered in the worst recession since World War II.

For all of 2012, 352 million PCs were sold, down 3.2 percent from 2011. That was the first annual decline since 2001, according to IDC, in the wake of the tech stock crash and the September 11 attacks.

IDC is forecasting a meager 2.8 percent growth in PC sales for 2013.

"There's a lack of compelling reasons to upgrade," said Ashok Kumar, an analyst At Maxim Group, who said people are now waiting up to 10 years to replace computers rather than five in the past.

"Increases in performance have been smaller and there are fewer new applications that require more computing horsepower," he said. "In developing markets, the first purchase is not a PC, it's a smartphone, especially in markets where literacy levels are low."

NO MIRACLES AT CES

The numbers are bad news for Microsoft, which still provides the underlying software for nine out of 10 PCs but is suffering as Apple's iPad and other tablets eat away at the cheap end of the PC market.

Touch-friendly Windows 8 and Microsoft's own Surface tablet were designed to counter that shift, but the radical new-look software has not gripped consumers' imaginations.

"Windows 8 wasn't going to be as big a catalyst," said Shaw Wu, analyst at Sterne Agee. "It's so different, it's almost uncomfortably different from past Windows, and there's a risk that Windows 8 ends up like Vista."

Windows Vista, released worldwide in 2007, was Microsoft's least popular operating system with users in recent years.

Microsoft pulled out of the Consumer Electronics Show in Las Vegas this year, vacating its usual sprawling display area, but PC makers such as Asustek, LG Electronics and Samsung Electronics filled the gap with a dizzying array of big screen computers, lightweight laptops, tablets and combinations of those, all running Windows 8.

Many of the new models attracted jostling crowds on the show floor, like Panasonic Corp's 20-inch ultra-high-definition tablet and Razer's dedicated Edge tablet for PC gamers.

But none was hailed a show-stopper that might single-handedly turn around the fortunes of Windows.

"No single device will spur sales, it will take time for consumers to learn that Windows 8 even exists. CES will do little to change that," said Sarah Rotman Epps, an analyst for tech research firm Forrester. "Windows 8 is going to be a slow ramp, regardless of hardware quality."

Microsoft says it feels good about the progress of Windows 8, as sales hit 60 million this week after 10 weeks on the market. That is in line with Windows 7 three years ago, and well ahead of Vista, which took 100 days to reach 40 million sales.

Tami Reller, chief financial officer of Microsoft's Windows unit, said sales of Windows 8 PCs may have been held back by shortages of the most popular touch-screen machines.

"The level of demand I think surprised a lot of people. And frankly, the supply was too short," said Reller at an analyst presentation at CES this week.

Microsoft is looking to juice that demand further this month with its new Surface with Windows 8 Pro, a tablet running an Intel processor that is fully compatible with Office and traditional PC programs, unlike the first Surface it launched last year based on an ARM Holdings-designed chip.

Despite that bullishness, analysts have been edging down their earnings expectations for Microsoft lately.

"Win 8 is disappointing, the PC market will remain weak for awhile and margins are likely capped," said Morgan Stanley analyst Adam Holt on Thursday, as he downgraded the stock to 'equal-weight' from 'overweight'.

Investors are also nonplussed, driving Microsoft's shares down neraly 20 percent since last March, even as the Standard & Poor's 500 has marched upward to a five-year high this week. The shares are down 6 percent since the launch of Windows 8 on October 26.

(Additional reporting by Poornima Gupta, Miyoung Kim, Timothy Kelly, Sinead Carew and Noel Randewich in Las Vegas, and Alistair Barr and Alexei Oreskovic in San Francisco.; Editing by Gary Hill and Steve Orlofsky)

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Wed Dec 26, 2012 5:08pm EST

n">(Reuters) - The 2012 holiday season may have been the worst for retailers since the 2008 financial crisis, with sales growth far below expectations, forcing many to offer massive post-Christmas discounts in hopes of shedding excess inventory.

While chains like Wal-Mart Stores Inc and Gap Inc are thought to have done well, analysts expect much less from the likes of book seller Barnes & Noble Inc and department store chain J. C. Penney Co Inc.

Shares of retailers dropped sharply on Wednesday, helping drag broader indexes lower, as investors realized they were likely to be disappointed when companies start to report results in a few weeks' time.

"The broad brush was Christmas wasn't all that merry for retailers, and you have to ask what those margins look like if the top line didn't meet their expectations," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group.

Growth was always expected to slow this season, though an improving employment picture and rising home values had helped mitigate the worst fears. But then Superstorm Sandy hit the East Coast in late October, mild weather blunted sales of winter clothing and rising concern about the "fiscal cliff" became more of a reality, dragging down already-pessimistic forecasts.

The latest sign of trouble came from MasterCard Advisors Spending Pulse, which reported holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year.

The preliminary estimate from SpendingPulse was in line with other estimates showing weak growth during the holiday season, when retailers can book about 30 percent of annual sales - and in many cases, half of their profit.

"It has been a very uneven industry performance, probably at least for the last year, and that certainly continued into the holiday season," said Michael Niemira, chief economist at the International Council of Shopping Centers, in an interview with Reuters Insider.

The latest holiday season could end up the weakest since 2008, during the last recession, when sales actually declined. The National Retail Federation had previously predicted 4.1 percent sales growth this year, versus a 5.6 percent increase a year earlier.

Markets reacted sharply to the gloomy outlook.

The S&P retail index closed down 1.7 percent, and 14 of the top 20 decliners in the broader S&P 500 were retailers or consumer brands.

INVENTORY CRUSH

To be sure, the actual percentage change in holiday sales can differ substantially, depending on which group is calculating the figure. SpendingPulse and the National Retail Federation, for example, look at different categories, which can cause some variation in their forecasts.

Regardless of how bad the figure is, one concern for retailers is that soft sales will mean an excess of inventory that will force some to slash prices.

The day after Christmas, retailers were using deep discounts to lure shoppers. Among other brands, Barnes & Noble offered 50 percent discounts in stores via email promotions on Wednesday, while Ann Inc had half-off at its Loft stores, and Macy's Inc's Bloomingdale's promoted discounts of up to 75 percent in some cases.

At a Target store in New York City's Harlem neighborhood, most shoppers seemed to be spending more on groceries, toys and small gifts than on gadgets or clothes.

Despite discounts of 50 percent, there were few takers for Jason Wu glass ornaments, Oscar de la Renta canvas totes and other designer goods launched under the mass merchant's tie-up with upscale chain Neiman Marcus.

Even in a good year, retailers would have offered discounts to lure customers, but some suggest a weak year has now forced their hands.

"Retailers are no longer chasing sales, they are chasing inventory management. That means the discounts that they would have liked to be at 50-60 (percent) off have climbed to 75 to even 80 (percent) off," said Marshal Cohen, chief industry analyst at The NPD Group.

This week's cold, snowy weather on the heels of a warm start to December could spur people to use the gift cards they received or their remaining discretionary income to buy everything from jackets to snow blowers, said Evan Gold, senior vice president of client services at Planalytics, which tracks weather for businesses including retailers.

In December, he said, "people are out spending anyway, weather can trigger what you purchase, not if you purchase, but what you purchase."

SANDY AND CLIFF

A variety of factors were thought to be at fault for the weak season, starting with Superstorm Sandy, which depressed sales in the U.S. Northeast in late October and early November.

Sales recovered in the second part of November, with early hours and promotions helping drive traffic during the "Black Friday" weekend after Thanksgiving, analysts said.

But there was a deep lull in early December as a winter storm in parts of the United States may have limited sales, said Michael McNamara, vice president of research and analysis at MasterCard SpendingPulse.

On top of that, there were fears that taxes will rise in the new year if Washington cannot negotiate a solution to the end-of-year "fiscal cliff" dilemma.

A recent Ipsos poll for Reuters found that only 17 percent of shoppers were spending less due to cliff fears, though analysts said the damage was still done.

"The government usually does not have a role in holidays but this year they did. They got right in the midst of it, the timing couldn't have been any worse," NPD's Cohen said.

BRIGHT SPOTS

One bright spot has been online sales, which continue to grow at a faster pace.

On Christmas Day, online sales jumped 22.4 percent, outpacing the 16.4 percent increase in 2011, according to IBM Digital Analytics Benchmark, which tracks more than 1 million e-commerce transactions a day from 500 U.S. retailers.

Whether online or off, some of the winning retailers were expected to be Wal-Mart, which attracted shoppers with early deals on the night of Thanksgiving and kept its focus on value, and apparel chains like the Gap, whose bright sweaters were successful, according to analysts.

Toys sold well, and hot items that were harder to find later in the season included certain Mattel Inc Barbie dolls and LeapFrog Enterprises Inc's LeapPad2 tablet computer, according to B. Riley Caris analyst Linda Bolton Weiser.

For retailers that have struggled, analysts said all hope was not lost. Many have fiscal quarters that end in January, so they still have time to benefit from a post-Christmas rebound. Because Christmas fell on a Tuesday, some said they could even see a boost this week from people who have extra time off.

"There's still a little bit more time to go until the holiday season is officially over," Morningstar analyst Peter Wahlstrom said.

Wal-Mart shares ended down 0.8 percent at $67.99 on Wednesday, while Macy's shares were down 1.1 percent at $37.11, Barnes & Noble shares were down 3.5 percent at $14.49, Amazon.com Inc shares ended 3.9 percent lower at $248.63, and Ann Inc shares lost 5.1 percent to close at $32.06.

(Reporting by Brad Dorfman, Nivedita Bhattacharjee and Jessica Wohl in Chicago; additional reporting by Chuck Mikolajczak and Dhanya Skariachan in New York; writing by Ben Berkowitz; editing by Jeffrey Benkoe and Matthew Lewis)

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1 of 14. An automobile sits upside down in the car lot of Mercedes-Benz of Mobile following a winter storm in Mobile, Alabama, December 20, 2012. The first major winter storm of the year took aim at the U.S. Midwest on Thursday, triggering high wind and blizzard warnings across a widespread area, and a threat of tornadoes in Gulf Coast states to the south.

CHICAGO | Sat Dec 22, 2012 10:45am EST

CHICAGO (Reuters) - Holiday travel could be a challenge from Michigan to the central Appalachian mountains as a blast of winter weather including heavy snow and high winds hits the region through Saturday, meteorologists said on Friday.

"Right now the Great Lakes are getting hit, from Lake Michigan to the east," said Pat Slattery, spokesman for the National Weather Service. "The big story for most people is it's going to mess travel up completely."

Pittsburgh is expected to take the biggest blow of any major metropolitan area, with 10 to 18 inches possible by Saturday evening. Western New York, including Buffalo, is looking at up to 14 inches, Slattery said.

The weather could be worse next week, with a potentially "really nasty system" that could bring tornadoes along with hail and high winds across the south on Christmas night into next Wednesday, according to Accuweather.com senior meteorologist Henry Margusity. That could stretch from Louisiana through northern Florida.

A "real big snowstorm" is expected for next Wednesday and Thursday, starting in Arkansas and moving north to Maine, with up to a foot of snow in some places. In New Hampshire and Vermont, "There will be snow on the slopes for New Year's Eve weekend," Margusity said.

This week's winter blast is part of the same system that buried parts of Iowa, Nebraska and Wisconsin in more than a foot of snow on Thursday, shutting down roads and schools.

More than 230,000 homes and businesses remained without power in the eastern half of the United States Friday afternoon, following a series of snow and rain storms, power companies said. The hardest hit states include Michigan, New Jersey, New York and Wisconsin. This was down from 320,000 earlier in the day.

Friday brought sunny weather to Iowa, and the state's Department of Transportation has "every person and every piece of equipment we have out on the roads," according to state maintenance engineer Bob Younie.

"Salt and the sun is going to be our friend today," Younie said. "I'd like think we're going to get the roads back to pretty drivable conditions."

The storm Thursday contributed to a 25-car accident near Clarion, Iowa, that left three people dead.

The winter storm, named Draco by the Weather Channel, began Tuesday in the Rocky Mountains, marking a sharp change from the mild December experienced by most of the nation. High winds kicked up a dust storm in western Texas on Wednesday leading to one death in a traffic accident near Lubbock.

Chicago got just two-tenths of an inch of snow through midnight, but it was enough to end a record streak of 290 days without measurable snow, according to Accuweather.com.

Other snowfalls set records Thursday, including Madison, Wisconsin, with 13.3 inches, beating a previous record of 4.6 inches for the date set in 2000. Even heavier snow fell in Middleton, south of Madison, which got 19.5 inches, Slattery said.

Also setting a record was Des Moines, Iowa, with 12.4 inches, breaking a record of 4.5 inches set in 1925, according to Accuweather.com.

(Reporting by Mary Wisniewski; Additional reporting by Scott DiSavino in New York; Editing by Richard Chang, Gary Hill)

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NEW YORK | Sat Dec 22, 2012 1:09am EST

NEW YORK (Reuters) - Fears about imminent tax hikes and cuts to government spending are taking a toll on U.S. shoppers and could deprive retailers of a strong finish to the 2012 holiday shopping season.

The acrimonious debate in Washington over how to avoid the so-called fiscal cliff has cast a pall over shopper sentiment, retail experts say, as consumers head to the malls on the last Saturday before Christmas - typically one of the busiest shopping days of the year.

Talks to avoid the fiscal cliff stalled on Thursday when Republican lawmakers rejected House Speaker John Boehner's proposal aimed at winning concessions from President Barack Obama.

"The longer Congress delays making a decision on the fiscal cliff and the more uncertainty people feel, as we go toward Christmas, they would start pulling back on their spending," said Ron Friedman, retail practice leader at consulting firm Marcum LLP. "I don't think we're going to get a great pickup in the last few days here."

About 17 percent of the 1,514 Americans who participated in a Reuters/Ipsos poll conducted December 17-20 said the impending "fiscal cliff" was making them spend less this season.

U.S. consumer sentiment also plummeted in December as Americans were unnerved by ongoing negotiations, data showed.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment tumbled to 72.9 from 82.7 in November, worse than forecasts for 74.7. It was the lowest level since July.

"What could have been a merry Christmas is going to turn to a ho-hum Christmas, and we can thank our, you know, politicians for getting in the middle of it all," NPD analyst Marshal Cohen said. "It is like this great unknown puts a big damper on the consumer feeling confident to go out and spend more."

More than 60 percent of U.S. consumers have already finished more than three-quarters of their holiday shopping, according to a Reuters/Ipsos poll released on Thursday. This means retailers will have to offer deeper discounts to force Americans to open their wallets in the last lap of the holiday season.

The holiday quarter can account for about 30 percent of annual sales and half of profit for many chains, and experts including Cohen and Friedman see retailers pulling out all the stops this weekend and the week ahead to woo last-minute shoppers.

"The only way retailers now are going to be able to get a boost is by creating their own stimulus package, and that stimulus package is going to be markdowns," Cohen said.

Earlier this week, research firm ShopperTrak lowered its sales forecast for November and December and now expects sales to be up 2.5 percent, rather than up 3.3 percent.

Many retailers reported record traffic at the beginning of the season, but several, including Macy's Inc and Saks Inc, lost a lot of business because of Hurricane Sandy.

Earlier this week, Redbook Research said chain-store same-store sales rose 2.2 percent so far in December, suggesting shoppers are indeed cooling their heels. Sales for the November-December holiday season look set to rise 4.1 percent to $586.1 billion this year after a 5.6 percent increase in 2011, according to a National Retail Federation forecast.

"Retailers are going to be pretty challenged this year in trying to get beyond all this," Cohen said, referring to a string of events this holiday season that have weighed on U.S. shoppers including the hurricane, gridlock in Washington and a recent shooting at an elementary school in Connecticut.

NRF sees 2013 retail sales rising about 2 to 2.5 percent if the fiscal cliff is averted. If not, sales would be essentially flat for the year, the trade group estimated in a study with Macroeconomic Advisers.

(Editing by Matthew Lewis)

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SAN FRANCISCO | Thu Dec 20, 2012 7:44pm EST

SAN FRANCISCO (Reuters) - Mobile game developers are scrambling to get on Apple Inc's top mobile app charts this Christmas, as seasonal sales are expected to reach an all-time high in a fast-growing market dominated by the iPad and iPhone maker.

Just as Billboard's music charts spell success for pop music, Apple's charts for the top paid, free and top-grossing apps have become a touchstone for the gaming industry, with a top ranking giving sales an extra boost.

As more mobile apps are downloaded around Christmas than at any other period, Apple freezes its charts as a way to deal with the overwhelming volume - giving top apps already on the lists guaranteed exposure over that period.

Game companies have double to 10 times the usual gamer traffic during this peak period, said Maria Alegre, chief executive of Chartboost, a mobile game ad network.

"But if you're in the top 5 or top 10 in the App Store rankings, then you get this extra exponential growth because everyone's looking at you," Alegre said.

The exact date and duration when Apple freezes those rankings is not fixed or announced in advance. In the past it has fallen between December 22 and 29 and lasted about a week.

What's certain is that the date is fast becoming the make-or-break moment for annual mobile gaming sales.

STRATEGIES

To clinch one of the 25 rankings on each of Apple's charts, the gaming industry has devised ever more technical tricks and marketing gimmicks, as the iOS market has evolved since the Apple's first iPad tablet was launched in 2010.

This year, game companies have become "more sophisticated" and "tactical" in the way they design and price content, following the early experimental years, beginning around 2010, said Nick Earl, senior vice president of Electronic Arts.

And game publishers have honed the ability to respond quickly to gamers and immediately tweak content and difficulty levels in real-time to push sales, Ellie Fields, senior director of product marketing at data visualization software company Tableau Software, said.

Strategies vary widely between companies. Some may focus on clever advertising while others craft holiday deals to generate a buzz around titles.

Smaller players like TinyCo and Pocket Gems may not have Electronic Arts' brand advantage so they cross-promote games and enter deals to advertise on their competitor's hit titles.

Say a mobile games maker invests $1 on a banner ad to acquire a new user and it learns through data analytics that the user is spending $2 in its game. Around Christmas, it can raise its ad budget in real-time or in advance and target a top-selling device, geographic location or demographic group, Alegre explained.

The ad strategies used to be a lot less smart but "right now people are more data driven and focused," Alegre said.

Electronic Arts' mobile label has planned 350 promotions, ranging from reduced rates to holiday-themed game content updates. The company uses data analytics and strives to maintain a daily deals site, tweaking rates and game offerings based on demand.

"We've really got smarter on what kind of deals to make available, when they should be unveiled, how many at a time and how many in parallel," Earl said.

The company's "Simpsons: Tapped Out" game based on the popular animated series was halted after its spring launch as its servers failed handle heavy traffic.

The city-building game was re-launched and this holiday has Homer Simpson's fictitious hometown of Springfield all snowy and adorned with Yuletide decorations.

For the Christmas period, technical stability is Electronic Arts' "No. 1 priority," Earl said.

DOWNLOAD VOLUME

The industry experiences a torrent of download activity starting on Christmas Eve until the first week of January as consumers use up app gift cards like iTunes gift cards.

In the last two years, the mobile gaming space has exploded as new tablets and phones flooded the market. Last Christmas about 7 million mobile devices were activated, compared to 2.8 million devices in Christmas 2010, according to mobile analytics firm Flurry. That's about seven times the number of Google Inc's Android devices activated on a normal day.

Android, which does not freeze its charts, has a lot more distribution but users spend less money than on Apple's iOS devices, analysts say.

Without providing details, EA said the number of its iOS games downloaded on Christmas day last year was 500 percent higher than the average daily download rate for all of 2011.

This presents a narrow, focused window for game companies like Electronic Arts and Disney Mobile to plug their games and landing them on app download charts maintained by hardware makers like Apple and Google.

That in turn spawned sophisticated strategies to handle the intense competition, Bart Decrem, Disney Mobile's senior vice-president, said.

Data analytics systems will be a revenue-driving weapon for mobile game companies on Christmas morning, Alegre said.

(Reporting by Malathi Nayak; Editing by Richard Chang)

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