Ted, All,
Something is definitely wrong here but take a lok at the bold part
that just simply can not be true
but if it is true then ibm and gtw are simply a non-issue
Regards
-Albert
07:23am EDT 21-Aug-01 Salomon Smith Barney (Richard Gardner +1-415-951-1669) CP
The PC Beat (Part 1 of 2)
SALOMON SMITH BARNEY Industry Note
PCs
The PC Beat
August 21, 2001 SUMMARY
* Dell surprised the Street with a downward
Richard Gardner revision to October quarter revenue and earnings
+1-415-951-1669 guidance last Thursday. The company now expects
richard.gardner@ssmb.com revenue to be flat to down 5% sequentially versus
Cynthia Hiponia Street expectations of flattish to up 5%. The
+1-415-951-1624 company expects earnings to be $0.15-0.16, one to
cynthia.s.hiponia@ssmb.com two pennies below consensus. Unit shipments should
Chris Noser rise in 3Q, but average selling prices may decline
+1-415-951-1731 another 3-6% qoq following a 7% qoq decline in 2Q.
* HP, on the other hand, believes its revenue will
rise modestly in 3Q. Mgmt attributed the
discrepancy between its guidance and Dell's to
differences in customer, product and geographic
exposure. We believe channel fill associated with
the XP launch in October will also contribute a
slight boost to HP's October results.
* In general, US retail data, channel checks and
last week's earnings reports offer few signs of
improvement in PC demand.
PC DATA POINTS FOR THE WEEK OF 8/13 - 8/19
DELL REPORTS IN LINE 2Q; PROVIDES GLOOMY 3Q OUTLOOK
Dell reported 2Q01 results last Thursday. Revenue of $7.6B (-1% yoy, -5% qoq)
and EPS of $0.16 (-28% yoy) were in line with revised guidance. Mgmt commented
that US demand remains lackluster, but that US consumer, government, Germany,
China and Japan represented bright spots (which we attribute to share gains by
Dell more than overall market strength). Geographically, China posted the
strongest growth (+31% yoy) while the Americas posted the weakest results (-3%
yoy). On the product front, combined server, storage and workstation revenue of
$1.4B (+8% yoy, -1% qoq) fell short of our estimate due to both lower units and
lower average selling prices while desktop revenue of $3.55B (-2% yoy, -6% qoq)
exceeded our estimate due to higher units partially offset by lower ASPs.
Dell achieved 19% yoy and 1% qoq growth in unit shipments in 2Q versus a 3% yoy
decline for the industry. This respectable unit growth, however, was offset by
a whopping 17% yoy and 7% qoq decline in average selling prices. CFO Jim
Schneider commented that component costs, which represent close to 90% of the
company's COGS, continue to decline about 1% per week and Dell remains
extremely proactive in passing these savings through to customers in order to
continue gaining share. The fact that Dell's gross margins fell 50bp qoq in a
very favorable cost environment and that the company still only achieved the
low-end of revenue guidance for the quarter is an indication of just how tough
the current demand and pricing environment remains.
Dell mgmt commented that it expects industry unit shipments to be flat or down
5% qoq in 3Q---we had been estimating a 5% qoq increase, but we concede that
our numbers may be a bit high for the following reasons. On the demand front,
we believe many consumers will defer PC purchases until the Oct 25 launch of
Windows XP, and that Europe and Asia will continue to deteriorate. On the
supply front, we believe indirect PC vendors (CPQ, HP, EEEE) will sharply
reduce shipments into the channel during August and September in order to
reduce non-XP channel inventories. In addition to lackluster unit growth, Dell
expects industry average selling prices to decline another 3-6% qoq, resulting
in a 5%-10% qoq decline in worldwide PC revenue during 3Q.
Because of declining average selling prices, Dell expects its own revenue to
decline 0-5% qoq in 3Q versus the Street's expectation of flattish to up
slightly. EPS guidance of $0.15-0.16 was also $0.01-02 below consensus.
HWP REPORTS 3Q01 PERFORMACE - OUTLOOK SLIGHTLY LESS DOWNBEAT THAT DELL'S
Hewlett Packard (HWP# - $24.74,1M) also reported 3FQ results last Thursday---
the results were slightly above revised guidance.
Back in January, CEO Carly Fiorina commented that HP saw consumer purchases
fall off sharply in January, followed by a decline in business IT spending. On
last week's call, Fiorina commented that HP experienced yet another dramatic
slowing in consumer sales during May-July, followed by yet another "ratcheting
down" in business IT spending. Fiorina also commented that HP sees signs of
further weakening in Asia Pacific and Latin America.
HP management expects revenue to rise sequentially in the October quarter.
Rather than a sharp re-acceleration in business or consumer IT spending,
however, Fiorina was careful to characterize any likely 3Q pick-up as
'subdued'.
HP's third quarter guidance was difficult to reconcile with Dell's---recall
that Dell guided third quarter revenue flat to down 5% sequentially. HP
attributed the disparity to differences in product, customer and geographic
exposure. We would add yet another factor---HP will begin filling retail
shelves with XP-based PCs in late September after shipping few systems in May-
July when it was attempting to reduce non-XP channel inventories
NVIDIA CHIMES IN
nVidia (NVDA: $83.19, NR) reported 2Q results on August 14. nVidia is the
leading supplier of graphics processors worldwide. The company expects a
seasonal pick-up in shipments following Intel's August 26 price cuts. The
company also commented that it is on schedule to release graphics processors
for the Xbox launch in early November.
MSFT TO FACE REMEDY AND TYING PROCEDINGS ON SCHEDULE
On August 17, the US Court of Appeals denied Microsoft's request for a delay of
further District Court proceedings in the Antitrust Trial.
Recall that MSFT appealed its case to the Supreme Court on August 7 citing the
appearance of bias on the part of Judge Jackson. At that time, MSFT requested
that the Appeals Court delay any further District Court proceedings on tying
and remedies until the Supreme Court decided whether to hear the case.
Microsoft's request was criticized by the District Court as a stalling tactic.
We view this as a minor negative for Microsoft for two reasons: 1) a delay
would have given the company time to formulate strategy for the next round(s)
of litigation; and 2) if the Supreme Court decides to hear the case, any
further proceedings at the District Court level will prove a waste of time and
money.
U.S. RETAIL UPDATE
Below, we review the most recent data from PC Data. PC Data tracks PC sales out
of 50-60% of all major US retail outlets using actual cash register receipts.
We consider this data to be a good proxy for the US consumer PC market (which
represents 40% of the total US market and roughly 15% of the worldwide market),
with the caveat that Dell is taking market share from retail and is not
included in the data. We do not consider this data to be a good proxy for the
total US or worldwide PC markets.
DESKTOPS
US retail desktop shipments declined 21% yoy during the week beginning July 29.
Desktop shipments increased 9% week on week---the third straight week of
sequential improvement. We expect US retail shipments to remain weak in August
and September ahead of the October launch of Windows XP.
WEEKLY DESKTOP SHIPMENTS YR/YR GROWTH BY PRICE POINT - U.S RETAIL
Week Beg. 6/10 6/17 6/24 7/1 7/8 7/15 7/22 7/29
$599 and below -49% -53% -69% -30% -79% -63% -63% -58%
$600 - $999 33% 23% 37% 37% 33% 6% 82% 89%
$1000 - $1499 -33% -41% -55% -46% -53% -40% -42% -23%
$1500 and above -6% -20% -35% -67% -46% -44% -47% -65%
Market Growth -15% -18% -31% -24% -46% -38% -35% -21%
Source: NPD Intelect and Salomon Smith Barney
WEEKLY DESKTOP SHIPMENTS WK/WK GROWTH BY PRICE POINT - U.S. RETAIL
Weekly Sequential Growth 6/10 6/17 6/24 7/1 7/8 7/15 7/22 7/29
$599 and below -14% -37% -2% 114% -58% 91% 30% -6%
$600 - $999 37% -8% 5% -33% 15% 8% 1% 25%
$1000 - $1499 -37% -11% 6% 40% -3% 1% 34% 5%
$1500 and above 136% -27% 1% -14% 28% -16% -9% -8%
Total 6% -17% 4% 5% -14% 19% 15% 9%
Source: NPD Intelect and Salomon Smith Barney
WEEKLY DESKTOP SHIPMENTS MARKET SHARE BY VENDOR - U.S. RETAIL
Week Beg. 6/10 6/17 6/24 7/1 7/8 7/15 7/22 7/29
APPLE 3% 3% 3% 2% 3% 2% 2% 3%
COMPAQ 31% 25% 40% 18% 36% 30% 47% 23%
EMACHINES 14% 15% 14% 15% 17% 14% 8% 14%
HWP 41% 43% 31% 46% 42% 42% 31% 56%
Other 12% 14% 12% 18% 3% 12% 11% 5%
Top 4 Aggr. Market Share 88% 86% 88% 82% 97% 88% 89% 95%
Source: NPD Intelect and Salomon Smith Barney
PORTABLES
US retail portable shipments grew 17% yoy and 10% wow during the week beginning
July 29. Portables continue to outperform desktops, but once again, we see
potential for shipments to weaken again ahead of the October launch of Windows
XP.
WEEKLY PORTABLE SHIPMENTS YR/YR GROWTH BY PRICE POINT - U.S. RETAIL
Week Beg. 6/10 6/17 6/24 7/1 7/8 7/15 7/22 7/29
$999 and below 102% 142% 429% 92% 47% 104% 97% 148%
$1000 - $1499 11% -45% -16% 12% 16% 26% 35% 25%
$1500 - $1999 64% 63% 41% 70% 0% 40% -3% 57%
$2000 - $2999 -44% -38% -30% -48% -47% -31% -39% -35%
$3000 and above -38% -38% -79% -41% -59% -55% -45% -76%
Market Growth 13% -5% 16% 8% -10% 13% 3% 17%
Source: NPD Intelect and Salomon Smith Barney
WEEKLY PORTABLE SHIPMENTS WK/WK GROWTH BY PRICE POINT - U.S. RETAIL
Week Beg. 6/10 6/17 6/24 7/1 7/8 7/15 7/22 7/29
$999 and below 7% -6% 79% -69% 23% 23% -8% 12%
$1000 - $1499 19% -42% 39% 19% 10% 7% 27% -14%
$1500 - $1999 12% -14% 6% -10% -23% 37% -12% 49%
$2000 - $2999 37% -6% 40% -37% 17% 15% -3% 27%
$3000 and above 8% -6% -64% 108% 6% 19% 5% -73%
Market Growth 16% -19% 30% -23% 0% 19% 4% 10%
Source: NPD Intelect and Salomon Smith Barney |
