Terry re: what to short (no encouragement) -- I took out some contracts on Gateway today -- they have been on a roll and hence have a good perch to fall from, they face competition and lower prices for their products and component prices are rising and in some cases are in short supply -- see the following for an example:
Monday August 16, 8:08 pm Eastern Time
Notebook shortage may sap PC maker profits-analyst
By Eric Auchard
NEW YORK, Aug 16 (Reuters) - Financial results for notebook computer makers
could suffer because of an industry-wide shortage of key components used to make
display screens, an analyst with brokerage ABN AMRO warned on Monday.
ABN AMRO analyst Jonathan Ross said International Business Machines Corp. (NYSE:IBM - news) appeared to be
affected by a shortage of liquid crystal display (LCD) chips and thus can only meet 70 percent of its notebook output goal
for August.
The analyst said he was hearing of the shortfall from unnamed ''reliable sources.'' He said other major notebook PC
makers that depend on Hitachi Ltd. for such LCD driver chips ''may be experiencing similar problems.''
He also estimated that notebook computers represent roughly 23 percent of Dell Computer Corp.'s (Nasdaq:DELL -
news) sales turnover, 10 to 15 percent for Compaq Computer Corp. (NYSE:CPQ - news) and around 10 percent for
Gateway Inc. (NYSE:GTW - news)
''Such adverse conditions should have a moderately negative earnings impact on notebook suppliers like Dell and
Compaq,'' Ross said.
Dell spokesman T.R. Reid said he was not aware of the analyst's comments but noted that the notebook display shortage
was an on-going, industry-wide problem which was not expected to disappear before the end of 1999. He declined to
comment further ahead of Dell's quarterly report due out Tuesday.
A Compaq spokesman said the company had recently refreshed its commercial notebook product line with a range of
new products ranging from lightweight ultraportables to heavy-duty ''desktop replacement'' notebooks. ''We don't know
at this time of any significant supply issues,'' the Compaq spokesman said.
IBM spokesman Mike Corrado said he was not aware of any shortage and that IBM had multiple suppliers of LCD
screens to alleviate any possible shortage from a single supplier.
Analysts believe IBM notebooks, including its ThinkPad line, contribute a disproportionate percentage of the profits for
IBM's overall PC business, which is struggling to return to profitability.
Hitachi sells its chips to two Taiwanese companies, Quanta Computer Inc. and Inventec Corp. , Ross said.
Quanta supplies notebook screens to Dell and Gateway, as well as Siemens AG (quote from Yahoo! UK & Ireland: SIEG.F),
Apple Computer Inc. (Nasdaq:AAPL - news), while Inventec is a supplier of screens to Compaq.
A Hitachi America spokesman said he could not immediately comment and referred calls to a spokesman for Hitachi
Semicondutor (USA). He was not available to comment.
''The evidence suggests that while IBM may be bearing the brunt of the shortages, it is an industry-wide problem,'' Ross
wrote in a note to his clients on Monday.
''While tightness is a good thing, these levels of shortages are likely to have a small but quantifiable negative impact on PC
companies' earnings, at least in August and possibly into September,'' he said.
Despite the analyst's remarks, shares of PC makers mostly posted gains for the day.
IBM stock rose $3-15/16 to $127-7/16, Gateway climbed $2-7/8 to $84-5/8 and Compaq rose 9/16 to $23-5/8, all on
the New York Stock Exchange. Apple added 7/16 to end the day at $60-1/2 in Nasdaq stock market action.
On the Nasdaq, Dell closed at $41-7/16, unchanged on the day. Dell reports results for its second quarter ended in July
after the close of regular session trading on Tuesday. The Wall Street consensus is for Dell to earn 17 cents per share,
according to brokers surveyed by First Call/Thomson Financial. |
