In the words of Bob Dylan, "It's a hard rain's a-gonna fall."

And fall it has for computer makers selling in retail stores, according to market researcher PC Data. In January, retail sales of desktop PCs plummeted 26 percent in units and 28 percent in dollars compared with the same period last year.

Notebooks fared a bit better, with sales down 9 percent in units but only 6 percent in dollars. The figures indicate that the PC sales slowdown, which started before Christmas, could linger.

"Obviously, it's another bad month at retail," PC Data analyst Stephen Baker said.
But there is at least one gold nugget. Consumers are spending more money.

Sales of PCs priced between $1,000 and $1,500 rose 65 percent year over year. Apple Computer and Emachines took the biggest hits in January, with sales down 60 percent and 50 percent, respectively, year over year. Compaq Computer saw a modest 5 percent decline, while Hewlett-Packard's sales dropped 17 percent.

Compaq recaptured the retail store lead from HP, with 45 percent market share compared with its rival's 39 percent. In December, the situation was nearly a mirror image to January: HP had 44 percent share, compared with Compaq's 36 percent. "That's about the highest combined market share the two have ever had," Baker said. "Compaq and HP clearly have entered a two-horse race." Emachines took the third spot with 10 percent share.

The average selling price fell 4 percent year over year to $850 but rose 3 percent from December's $827. The change in selling prices comes as the sub-$1,000 market continues its decline and consumers crave PCs with more features.

PC Data reported that sub-$1,000 PCs in January accounted for 64 percent of retail sales, the lowest since February 1999.