MB and gang:
Been on the road for a bit (to the U.S west coast and back, then down to the Philadelphia area and back) and thought you might be interested in a few observations.
Consumer PC sales, which experienced a nice (but short) little bump in the spring (courtesy of the big Nasdaq run-up, in my opinion), has since fallen off the cliff. For the first time in many years, I found unanimity among ALL the contacted retailers,..... sales of PCs suck.
To provide an idea of how bad it appears to be, even the "local cloners" (referred to in some areas as "white box builders") are crying the blues. These guys usually manage to get by, even when the large retailers are cutting their throats, but this time, everybody is feeling the sales pinch. In general terms, the consumer PC sales that are taking place, tend to be either at the very top of the line (not very many) or the very bottom of the line (not enough to make it worthwhile).
With ASPs continuing to fall, retail margins are ugly. Many stores report that they have been laying off sales staff and cutting the number of lines carried to try to cut back on expenses. Very few are optimistic about the coming fall season (in spite of what N.Y. analysts are saying).
Very telling to me is the fact that retailer support provided by the big box builders is also getting skinnier. Promotional budgets and shared advertising revenues are in decline.
With respect to business PC sales, in effect, they don't exist anymore. The story from coast to coast is that business PC buying simply disappeared last fall and hasn't shown the tiniest indication of any form of bounce. I could not find one optimist among any of the surviving resellers (keep in mind the fact that FIVE major resellers have now filed for bankruptcy and countless smaller regional firms are on the ropes). This sector has been totally ravaged. I wonder why we never hear about this from Wall Street?
The magic word everywhere was inventories,..... and at every level. Plenty of evidence everywhere of big inventory back-ups, (much like what we saw a couple of years ago, only worse). The difference is, that few expect the flourescent lights to emerge from the pallets this time as a result of price cuts, as the public appears to be completely satiated. Many contacts stated flatly that price cuts are having less and less impact on sales as time goes by.
To all intents and purposes, the PC tennis ball is once again firmly ensconced in the toilet bowl, yet the stock market refuses to either see this or believe it, so what happens now? IMHO, sometime between now and mid fall, there is going to be one heck of a tech wreck. Until a few weeks ago, many box builders were exuberantly shovelling semis into inventory, even as they built up their finished goods inventories. Obviously, if PC sales do not vault dramatically, we are going to need to invest in tarpaulin manufacturers, as there is going to be a big shortage of tarps, under which to store all this product as winter draws near. I do not see any way that H2 sales can come even close to clearing this inventory build-up, and in fact, it will likely become a serious finished product glut. This mess is not going to stay under the covers for very much longer, hence I intend to become much more aggressive in PC/semi "put" land in the near term. As was my advice last year with respect to the dot coms, a judicious "shotgun approach" to the PC/semi sector is likely to provide a superior return as this very soggy pot of porridge hits the front pages of the financial press.
Best, Earlie |
