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Software sales slumping
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March 14, 1997: 9:06 p.m. ET
Fewer computer programs selling, in part because of Internet's growth
From Correspondent Fred Katayama
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NEW YORK (CNNfn) - Microsoft Corp.'s desktop operating system Windows 95 propelled software sales in 1996. However, early indications show this year may not be as lucrative for software developers.
All around Silicon Valley, there's evidence of a slump in the $2 billion a year U.S. consumer software industry. Consumer software sales have fallen off recently and they've taken the stocks of large software producers with them.
Sales of TV-based 3-D video games like those made for Nintendo and Sega systems are outgunning computer-based entertainment software.
That's one of the reasons several software companies have disappointed Wall Street in the past few weeks with lower earnings.
Like the twist in its game Myst, Broderbund Software Inc. last week surprised Wall Street analysts with profit forecasts that fell short of expectations.
Just one week earlier, personal finance king Intuit reported weak earnings for its consumer software.
Those moves led stocks of both companies to fall by double digits.
Larry Marcus, new media analyst for Alex. Brown, said the Internet's popularity surge has left the consumer software business bruised and battered. (116K WAV) or (116K AIFF)
A lot of computer users say they use the Web so much, they find their need for new software has slowed.
In addition to slumping software sales, fewer personal computers have been going out the doors of retailers, and many of those that are sold already come bundled with plenty of software.
Plus, shrinking shelf space has meant software retailers have been unable to accommodate all the new titles.
Those changes in the marketplace are among the reasons software retailing pioneer Egghead Software has posted a string of losses and why its stock is trading near its 52-week low.
Slower sales have led software monoliths to swallow weaker companies like Pacman. Among those is educational software maker Edmark, which was recently absorbed by IBM.
Intuit still dominates the personal financial sector with an 80 percent market share. However, fierce competition from Microsoft's Money software has whittled its margins.
Intuit's tax preparation program Turbo Tax, also has come under severe pricing pressure, this time from H&R Block, which is selling its TaxCut software for as little as $5.
Analysts expect the consumer industry's normally fast growth to slow down to 15 percent this year. That means software companies are going to work much harder to squeeze out profits. It also makes it increasingly likely that more industry consolidations are on the way. 
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