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Consumption of gadgets strong despite crunch

Slumping consumer confidence is squeezing apparel chains and department stores this holiday season, but people are still buying computers, iPods and other electronics.
/ Source: The Associated Press

Slumping consumer confidence is squeezing apparel chains and department stores this holiday season, but people are still buying computers, iPods and other electronics, benefiting tech companies from Apple Inc. to Seagate Technology.

Retailers reported mixed November sales Thursday as shoppers watched their wallets amid the ongoing economic slowdown and a tightening credit market.

But sales of personal computers, especially laptops, as well as Apple's iPod music players, are going strong, analysts say.

Despite anxiety about potential softness in the consumer electronics market post-Thanksgiving, "demand for tech products remains healthy, with strength in notebooks and iPods somewhat offset by weaker demand for desktops," wrote Bear Stearns analyst Andrew J. Neff in a note to investors.

Bear Stearns conducted a retail survey over the past three days and found that iPod demand remains "very robust, with some stores reporting difficulties in meeting demand." Neff noted, however, that overall iPod availability has improved considerably from last year.

Overall PC demand, Neff said, "appears to be healthy, largely driven by continued robust demand for notebooks," helped by lower prices. Neff called desktop demand "anemic."

However, RBC's Mike Abramsky expects "massive" sales of Apple's Macintosh computers during the current quarter, with desktop sales soaring 43 percent in the first quarter of next year, to 900,000 units.

Compared with PC makers like Dell Inc., Apple still holds a small percentage of the world's personal computer market. But it has been growing its share recently, helped in part by the iPod's popularity turning new converts on to its Mac computers.

Neff expects hard disk drive makers Seagate Technology and Western Digital Corp. and touch sensor maker Synaptics Inc. to benefit from strong notebook sales around the holidays. And while computer accessories are not a hot gift category, Logitech International SA will likely profit from strong wireless mouse demand, he added.

Other popular tech gifts include handheld navigation systems and digital picture frames.

Apple's shares rose $2.25 to $187.75 in early afternoon trading. Shares of Dell climbed 44 cents to $24.75 and rival Hewlett-Packard Co.'s shares were unchanged at $51.66.

Shares of Seagate slid 2 cents to $27.17 and WDC fell 21 cents to $30.21.

Shares of navigation device maker Garmin Ltd. fell 98 cents to $107.49.