PC Sales Growth Could Fall in 2001, Investors Say (Update1)
1/18/01 1:36:00 PM
Source: Bloomberg News
(Adds that IDC will update its forecasts on Monday in 4th-to- last
paragraph.)
San Diego, Jan. 18 (Bloomberg) -- This year could turn out to be the
toughest in a decade for personal-computer makers as they collect
less revenue this year because of declining prices and growth in PC
shipments fall to a 10-year low, some investors said.
They're making these bleak predictions as PC makers scurry to
unload PCs that are sitting on warehouse shelves because holiday
sales fell short of targets.
A slew of PC makers have said fourth-quarter results didn't meet
forecasts and warned that this year will be a tough one as businesses
and consumers put off plans to buy PCs. They include No. 1 PC
maker Compaq Computer Corp., Gateway Inc., Hewlett- Packard Co.,
Apple Computer Inc. and Micron Electronics Inc.
''It's certainly one of the toughest times the industry's been through,''
Gateway Chief Executive Jeffrey Weitzen said.
Those troubles mean that growth in PC shipments could fall below 10
percent this year for the first time since 1991 and that total sales
could decline from last year, said analysts for some of the largest
U.S. money managers. Their estimates are more pessimistic than
ones from research firms such as IDC, which last month said it expected shipments to grow 16
percent.
''They've already built the boxes. They've got to sell them. That means they'll have to discount,'' said
Christian Koch, an analyst with Trusco Capital Management. Trusco holds 2.5 million shares in Dell
Computer Corp., the only PC makers who stock it holds a $50 billion portfolio.
Gateway, the No. 2 direct-seller of personal computers, is one of the companies whose problems are
most serious, Koch said. Last week, Gateway said it would fire 2,400 employees, or 10 percent of its
workforce. It also said fourth-quarter sales fell 15 percent from the previous year, squeezing profit to
just a third of what it had forecast.
''It was probably one of the worst Christmas seasons in industry history,'' Gateway CEO Weitzen
said.
Such pessimism has yet to be reflected in forecasts from IDC, which issued its last forecast for 2001
sales on Dec. 5, more than a month before Gateway announced the firings.
At that time, the outlook was rosier. During the first three months of last year, global PC shipments
grew 24 percent on year 94.6 million units, according to IDC. That's after shipments grew 24 percent
in 1999 and 13 percent in 1998.
Independent Investment Associates analyst John Park is expecting growth in global PC shipments to
slow to single digits this year and he's forecasting that price-cutting will cause the total revenue from
those sales to fall by at least 5 percent.
''If current conditions continue and we don't get a demand snapback, it could be a really lousy year,''
said Park, whose firm manages about $28.6 billion.
Companies that sell powerful server PCs, which are used to run Web sites and manage databases,
stand to do better than makers of less-powerful boxes that sit on desktops and handle more routine
tasks such as word processing and accessing the Internet, said Jay Nakahara, manager of the $1
billion Invesco GT Technology Fund.
''In more difficult times, IT managers have to prioritize,'' Nakahara said. ''The decision to put off a
desktop upgrade is a relatively easy one.''
Some market researchers said it's too early to determine that 2001 will be a bust for PC makers.
Growth in global PC shipments is likely to be in the ''mid teens,'' while U.S. growth will be about 10
percent, said Charles Smulders, principal analyst for Gartner Dataquest.
Gartner is watching PC sales and economic indicators to determine whether it needs to adjust those
forecasts, Smulders said.
''It depends on what happens with the U.S. economy,'' he said. ''If we see a significant downturn in the
U.S., it will affect other markets.''
One key piece of data will be fourth-quarter PC sales figures, which Gartner is likely to release on
Monday, Smulders said. IDC said it may also revise its forecast for 2001 growth at that time.
Independence Investment Associates made its decision about the PC outlook long ago. In the third
quarter of last year it started unloading the shares it held PC makers and has sold virtually all of them
since then, Park said.
PC makers are unlikely to have any good news until the end of this year, when the poor 2000 holiday
season may make it easier for PC makers to post strong sales growth, Park said.
''Q4 of last year was lousy for all the PC guys. So in Q4 of this year, you should have the benefits of
some easy comparisons,'' he said. |
