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Computer store lags behind UCLA Store¹s overall increased revenue

By Daily Bruin Staff

Jan. 26, 1997 9:00 p.m.

Monday, January 27, 1997

ASUCLA:

Computer sales down due to Apple’s tribulations, but software
sales still going strongBy Frances Lee

Daily Bruin Contributor

Still basking in the afterglow of their much- touted store’s
recent grand opening celebration and encouraged by
higher-than-expected revenues, the students’ association has begun
to breath a collective sigh of relief.

Although still too soon to predict a strong financial recovery,
ASUCLA Finance Director Rich Delia told the board of directors on
Friday that "we had planned to break even in January, but we’re
hopeful that we can do better than that."

Boosted by increased student patronage and a winning men’s
basketball team, the UCLA Store’s revenues for the first three
weeks of January exceeded expectations by about 4 percent ­
bringing in $185,000 more than planned.

Rifling through a table of sale merchandise, Parvaz Farnad, a
third-year biology and Iranian studies student, admitted she has
spent time and money at the new store. "It’s very nice and very
big. You can find anything you need down here," she said.

ASUCLA reported that growth has been steady in most areas of the
store. BookZone’s success is especially noteworthy because it is an
indication that the store is "servicing the UCLA academic
community," according to Carol Anne Smart, the chief operating
officer and general manager of the UCLA Store.

But despite the promising results, the computer store’s
disappointing revenue shortage represents "an ongoing challenge"
for the association, Smart said. Hurt by their dependence on
computers built by Apple Computer Corp., the computer store posted
a loss of $131,000, falling 17 percent below expectations.

Smart maintained that the computer store is "absolutely not
losing money" despite the dismal results. "We have had a retail
sales erosion (in computers), but we’re still making money."

The money is coming, in large part, from strong software
sales.

Smart said the software division is one of the areas which has
benefitted the most from the UCLA Store’s expansion. Given the
increased space devoted to software, competitive academic pricing
and higher profit margins, the association is hoping to capitalize
on student demand for more titles.

But while software has a considerably large profit margin,
profits from computer hardware sales are considered the lowest in
the retail industry, with an average markup between 8 and 12
percent.

Given the financial difficulties that Apple is now facing and
with 80 percent of the store’s stock concentrated in the company’s
Macintosh computer line, it is not surprising that the computer
store has not been performing as well as other areas of the
store.

Apple has traditionally been the computer company that supports
higher education the most, Smart said, and the maker’s recent
setbacks are "negatively impacting our business."

"The computer store’s business is difficult because of the
confusion and change at Apple," she added.

Linda Feather, an account representative for Apple Computers who
works with the UCLA Store, noted that "Apple still has field
representatives assigned to higher education accounts. Rather than
backing away, we’re maintaining support."

According to recent reports in "The Wall Street Journal," Apple
Computer Co. posted a first-quarter 1997 loss of $120 million,
compared with a loss of $69 million in the same period a year
earlier.

At the same time, computer industry giants such as IBM,
Hewlett-Packard, Intel and Compaq reported rock-solid earnings for
the same period.

According to the Journal, Macintosh and Apple are slowly being
abandoned by potential buyers because their worldwide market share
has been halved over the past year to about 5 percent. Software
companies, alarmed by Apple’s decline, are starting to edge away
from producing software titles for the Macintosh.

Smart acknowledged that "people want (IBM-compatibles)."

Indeed, students browsing the computer store seemed more
attracted to the four Dell IBM-compatibles on display than the
wider assortment of Macintosh machines.

Since buying a computer is a considerable investment, students
are most likely to spend their money on a machine that will take
them beyond their college careers.

Jason Klein, an master’s student at The Anderson School,
recently bought one of the IBM-compatibles offered by the store
instead of a Macintosh. Klein believes that the IBM is "the
standard machine. (The Macintosh) is not what I expect to see in
the business world."

But even though demand for IBM-compatible machines may be
higher, the store is not as likely to carry those machines because
of the companies’ relative indifference toward the higher education
market.

"Apple has (traditionally) had such a stronghold in higher
education in terms of academic pricing, support and service," said
Smart. "The Intel producers ­ Hewlett-Packard, Compaq or Dell,
are not set up to support higher education" on the same level as
Apple is.

While Apple shows a strong dedication to the academic market,
producers of IBM-compatible machines deal primarily with large
retail chains such as Circuit City, Good Guys and Best Buy,
according to Smart.

Despite being one of the largest single-unit sales locations in
the country, the UCLA Store is "too small to get their attention,"
she said.

In addition, those computer companies have not been as
responsive as Apple to making stronger inroads into academic
pricing.

Consequently, the few IBM-compatible machines that the store
does offer are not as attractive to students because of their
higher prices.

But while students may be tempted to go to a larger retail chain
to buy a computer, Smart believes the UCLA Store’s level of service
­ both before and after purchase ­ gives them the
competitive edge.

"Our service level is second to none," said Smart.

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