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Flat gadgets, flat profits

Amy Scott Jan 11, 2007
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Flat gadgets, flat profits

Amy Scott Jan 11, 2007
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MARK AUSTIN THOMAS: U.S. consumers spent $145 billion dollars on electronics last year. They’re expected to spend even more this year. So why aren’t gadget makers celebrating? Marketplace’s Amy Scott explains.


AMY SCOTT: The companies that rolling out the flat-screen TVs and cell phones driving the gadget boom aren’t exactly rolling in dough.

Reuters reports that in the last few years profit margins at Sony, Samsung, Panasonic and Philips haven’t topped six percent. That is, for every dollar they make in revenue, less than six cents is profit.

Analyst Rob Enderle says it’s a simple case of oversupply.

ROB ENDERLE: While people are buying these things in unprecedented numbers, people are also building them in unprecedented numbers. And when you’ve got supply that exceeds demand, you’ve got a margin problem.

Enderle says instead of slashing prices as the companies did over the holidays, they could take a page from Apple. He says the maker of iPods and the new iPhone keeps prices high, but then markets its products so well that customers are willing to pay.

In New York, I’m Amy Scott for Marketplace.

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