CORSAIR HS70 BLUETOOTH
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Similar to much of American life in 2020, this year’s Black Friday shopping extravaganza is also going to look a little bit different when it comes to hunting for the best bargains for games and accessories.
As large publishers such as
Activision Blizzard
(ticker: ATVI),
Electronic Arts
(EA), and
Take-Two Interactive Software
(TTWO) have noted several times during their quarterly earnings calls since the Covid-19 pandemic took the world by force, people are playing more videogames than they ever have before. That has been a boon to publishers, but also to companies that make the equipment and other hardware gamers buy to make the experience more enjoyable—or share with friends, in the case of streaming.
What’s happened is that much of that hardware, be it graphics cards, videogame consoles, or mice and keyboards, has sold so well there isn’t very much excess inventory, according to
Corsair Gaming
(CRSR) CEO Andy Paul. Typically Black Friday—and the now follow on Cyber Monday—marks a moment that hardware makers and retailers use to dump last year’s inventory.
Not so in 2020, however. “This year most people are kind of sold out because of the increased demand,” Paul told Barron’s in a phone interview. For “most of us, certainly the companies that are at scale like ourselves, it has been challenging getting the supply chain to ramp up to the current demand, so there really aren’t a lot of excess [stock-keeping units] or anything.”
That is especially true for the company’s game streaming and videogame peripheral products, which have been largely sold out for duration of the year.
It’s also been difficult for Corsair to scale up production because doing so means hiring hundreds of people and adding multiple new manufacturing lines. If the demand spurred on by the coronavirus pandemic doesn’t continue, Paul worries that he would then have to send all the workers home.
This year, there is no real need for Corsair to sell its excess inventory on Black Friday—it doesn’t have any—but it is trying to help out retailers. Corsair sells videogame PCs and makes a host of accessories such as keyboards, headsets, and streaming hardware. Paul says the company is selling some discounted products such as a bundle with headphones, a keyboard, and mouse, but not many.
Corsair’s largest business, memory and power supplies for PCs, don’t lend themselves well to holiday gifting—both are vital to a gamer’s PC functioning, but would be akin to buying a family member new brake pads, or a catalytic converter for the holidays.
To put the hardware industry’s depleted inventory in perspective, in the third quarter, Paul says Corsair is shipping 60% more products and in the videogame categories the company had doubled shipments. “We’re shipping a lot more than we used to, but in many cases demand is even greater,” he said.
What’s picked up especially this year is the market for high end videogame PCs, machines that cost upward of $1,500 in some cases, and use the latest high-end graphics cards made by the likes of
Nvidia
(NVDA) and
Advanced Micro Devices
(AMD). Paul says the market for such computers is growing roughly 30% to 35% this year when previously it would grow around 5% to 10% a year.
In general, Paul says Corsair doesn’t like to offer deep discounts because if his company isn’t disciplined about it, people tend to swoop in to buy the products while on sale and then resell them at the regular price over the next several months, making a few percentage points. It’s something akin to an arbitrage trade.
Corsair shares plunged 17% in Wednesday trading to close at $42.80. The stock has gained 152% since its initial public offering in September.
Write to Max A. Cherney at max.cherney@barrons.com
