Fleck wasn't silenced after all...yesterday's Rap is finally up and its a doozy:
Love is in the air. . . We had two of the better known cheerleaders come out touting Gateway and Intel
for a variety of spurious reasons. What makes this particularly interesting is that while they were doing
that, and PC stocks were getting lit up, we had a pre-announcement by eMachines, which is the
third-largest vendor of desktop PCs sold through U.S. retailers, and also a big user of Intel products. I'm
going to share the whole quote down below so folks can get a good look at what's happening in the real
world, versus what cheerleaders claim is happening:
Stephen A. Dukker, President and Chief Executive Officer of eMachines, Inc., commented:
"As we have previously noted, consumer demand for personal computers in the second
quarter has been significantly below market expectations. The drop in that demand has
coincided with concerns about interest rates, the state of the economy, and the growing
instability of the public securities markets. Several of our top retail accounts recently have
announced that their sales of personal computers as well as other technology and
big-ticket items are down. Further, we believe that a significant accumulation of inventory
on the part of our competitors and in the retail channel has occurred, resulting in significant
discounting. We have responded in kind."
"Although we appeared to have gained market share by one to two points during the
quarter, according to both PC Data and NPD Intelect, this increase in share was not
sufficient to offset the significant reduction in total purchasing in the market by consumers.
We anticipate that the third quarter results will be harmed by displacement of products
scheduled for release in the third quarter by the sale of current products at significant
discounts. While we believe that the current inventory overhang will be resolved early in the
third quarter, looking forward, we expect that growth and demand will correlate to
consumer confidence in the economy and stability of the public securities markets," said
Dukker.
So that's what a guy who makes PCs has to say, in contrast with what the cheerleaders of Wall Street
say. Isn't it remarkable how these guys are capable of over-looking the obvious?
Dancing by themselves. . . In the not so obvious department, one fellow whose research I depend on to
do "channel checks" sent a fax about what was going on in the Pentium III processor market. In it he
said that one large Korean OEM admitted they had overbooked processors when deliveries were tight in
April. Now that deliveries have loosened, they are stuck with "thousands of excess Pentium III
processors with little ability to move them into spot due to soft spot demand. The slowing supply of
Pentium III processors in spot suggests that other PC OEMs and system integrators may also have
overbooked processors during the supply crunch this year."
So there you are folks, a quote from a friend of mine who does excellent channel checks, further
corroborating exactly what the CEO from eMachines says. There is a huge problem brewing in PCs. It's
been there forever, and with a modest amount of effort you can put the picture together yourself.
Meanwhile, Wall Street does its dance of delusion and confuses raising price targets with doing actual
research.
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