Sorry if the following has been posted: Hardware makers see stronger
sales this quarter
By Jim Davis
Staff Writer, CNET News.com
March 3, 2000, 8:00 a.m. PT
After a series of disappointing earnings announcements following PC
component shortages and sales slowdowns, hardware executives now
say that business is getting back on track.
Still, analysts say that there are enough open-ended questions to make the
forecast for PC demand unclear.
"My feeling is that we're in a trough between two waves," International Data
Corp. analyst Roger Kay said.
Analysts and industry executives have lost sleep over the past few months
wondering when corporate customers would get back to stores to buy new
hardware. The slump followed a serious ramp-up in sales as businesses spent
tons of money buying new computers to prepare for the so-called millennium
bug.
Kay said that current lackluster sales
follow frenzied purchasing before the
new year but could precede new sales
related to the widespread rollout of
Microsoft's Windows 2000 operating
system.
Dell, Compaq, IBM, Hewlett-Packard
and Gateway all started off the year
by reporting earnings that were lower
than originally anticipated, sparking
concerns about the health of the
overall PC market.
Another lingering uncertainty was how
long corporate customers would wait
to start buying in 2000, given that
Windows 2000 didn't launch until Feb.
17--about halfway through the quarter
for companies like Gateway and
Compaq.
Now, PC makers appear to be getting over their New Year's hangover, if
preliminary indications hold up.
"The Y2K impact, if there was one, was (basically backwards) from what
people expected," Webb McKinney, vice president of Hewlett-Packard's PC
organization, told CNET News.com. November and December were very
strong, but January was slower than expected, noted McKinney, who recently
spoke at a technology investment conference sponsored by Robertson
Stephens.
"The early indication is that things are picking back up this month," he said.
Sales of Hewlett-Packard consumer PCs are rising faster than the industry
average this quarter. The company is benefiting from the exit of Packard
Bell and IBM from the retail channel, a company representative said.
Gateway financial chief John Todd recently said at the
same investor conference that so far, this quarter is
shaping up to be better than last. Yet that isn't
necessarily a ringing endorsement, given that the
company reported lower-than-expected earnings last
quarter, citing a slowdown in sales from Year 2000
concerns and component shortages.
Regardless, Gateway maintains that the company is on
track. Todd said that consumer PC sales were strong in
January, but corporate sales were flat. Corporate PC
sales improved in February, however, and consumer PC sales internationally
have been strong, he said.
Analysts expect 16 percent growth in earnings for Gateway in the first quarter
of 2000--about three times that of the industry average. The company should
be able to meet those numbers, Todd maintained.
Preliminary signs seem to indicate a slight rebound in February sales from
January's larger-than-usual seasonal slump.
At the same time, U.S. and worldwide growth is still not expected to match
last year's numbers, according to research firm Dataquest. While last year the
industry posted growth rates of around 21 percent, this year Dataquest is
currently predicting unit growth of about 15 percent in the United States and
16.2 percent worldwide.
PC companies will need to come up with new reasons to get
corporate customers to upgrade their PCs this year to maintain
growth rates seen over the last three years.
"Products such as Compaq's iPaq and HP's eVectra will have to be
low-cost, and have a low cost of (ownership)," Dataquest analyst
Charles Smulders said. "That will persuade end users to upgrade in
what is becoming a saturated market."
But is the market saturated? IDC predicts that 12.2 million
computers will ship in the United States in the first quarter of 2000,
compared with 9.9 million a year ago--a 23 percent jump. However,
the forecasts were calculated three months ago; the company plans
to release updated figures soon.
A large number of corporations spent a significant amount of money
upgrading equipment last year in order to minimize any potential
Y2K problems. For the first month and a half or so in 2000, Kay said
there was a big lag in purchases as companies regrouped to map
out their strategies for the introduction of Windows 2000 after it
became available in mid-February.
Now that Windows 2000 has finally been
officially unveiled, PC purchases have been
picking up. Also, Kay said that component
shortages that afflicted the likes of Gateway at
the end of last year have been easing.
Compaq chief executive Michael Capellas said
last month that he expected a large portion of
the company's sales for the first quarter of fiscal
2000 to come late in the quarter.
An IBM representative noted that Big Blue's sales also tend to be
slanted towards the latter part of the quarter, so it is too early yet to
tell how things are progressing.
Related news stories
? Dell warning points to uncertainty in PC market January 26, 2000
? Compaq reports drop in revenue January 25, 2000
? Gateway meets lowered Street expectations January 20, 2000 |
