Wednesday: No Harvey Norman profit release for the
2005 year. It was due for release, but just before 6pm the surprise resignation
of director, Stephen Hauville was revealed in a brief
statement.

Resignations from the board and inner circle of Gerry
Harvey’s empire are rare. The most recent I can remember is when his son Michael
stepped down as an executive but remained on the board. That was a few years
ago.

It was
announced here with the reason that he’s off to pursue “personal interests.”

Tosh, he has been the loser in a continuing power struggle at Harvey Norman over convergence products:
electronic products that are both computers and entertainment.

Earlier this year we reported that Hauville, Harvey Norman’s General Manager of Consumer
Electronics and a director of the company, had been switched to overseeing the
international stores.

That saw him moved from the
senior position of running a national consumer electronics operation in
Australia of 179 stores to being responsible for Harvey Norman’s international
operations of 21 stores in New Zealand, two in Ireland, one in Slovenia and 11
in Singapore: a demotion if ever there was one, even if the foreign stores are
all company owned.

The reason given by John Skippen, Harvey Norman’s chief finance officer was that the
company wanted to replicate its Australian concentration on consumer electronics
in its overseas stores.

But the move also came as the company wonders
whether it should be merging its consumer home entertainment products
business with its IT computing businesses, following the trend towards
convergence that’s emerged with so-called media centres and similar products.

They
are both an IT, computer based product, but with enormous home entertainment
capabilities.

Price
deflation in both these areas is hurting Harvey Norman (and other retailers).
International prices of LCD screens fell 41% last year and that means the
products in stores like Harvey Norman are worth less each week and
month.

This
means unrelenting downward pricing pressure. Price falls are also occurring in areas like Plasma TVs, computers, printers, MP3
players and in convergence products.

It
means stores like Harvey Norman have to sell more units to try and maintain or
grow dollar sales and profit margins. But the market place is becoming saturated
and this is proving more difficult. That’s
why Harvey Norman has been pressuring suppliers to lift rebates and its
franchisees in Australia to boost their floor
selling prices.

Harvey Norman’s basic income stream is the franchise and
other fees levied in its 188 or so Australian store complexes: boosting the
floor selling price will effectively boost the dollar value of those fees, while
boosting the rebates will provide more money for marketing.