Computer makers say sales may have hit low water
By Nicole Volpe
NEW YORK, April 18 (Reuters) - Computer makers, stretched to the limit by a slowdown in spending by both businesses and consumers, have posted dismal earnings this quarter, but executives and analysts said they see small signs that the market may yet snap back a bit this year.
``The market clearly slowed down a lot, but we think we're going to see a bit of a rubber band effect,'' said International Data Corp. analyst Loren Loverde.
First-quarter results this week were a rough ride.
IBM (NYSE:IBM - news), the world's largest computer maker, reported its sharpest drop in earnings since 1993. Intel Corp. (NasdaqNM:INTC - news), the No. 1 chipmaker for personal computers, posted lower earnings than a year earlier.
Microsoft Corp. (NasdaqNM:MSFT - news), which makes the operating systems that run on most personal computers, posted disappointing sales. It also said that while personal computer sales to consumers may improve in the current second quarter, business spending would be ``quite modest.''
But in conference calls with Wall Street analysts, and in orders numbers that reflect future demand, there was some small sign of hope for the second half of the year.
IBM signed more than $15 billion in services contracts, leading the company to say it expects to meet analysts' 2002 estimates as services revenue returns to double-digit growth.
Paul Otellini, Intel's president and chief operating officer, spoke about ``the inevitable recovery,'' despite the fact that so far demand for personal computers has yet to materialize.
Compaq Computer Corp. (NYSE:CPQ - news), which has agreed to be acquired by rival Hewlett-Packard Co. (NYSE:HWP - news), said it had managed to eke out about $1 billion in major account orders despite lower capital spending by corporations.
But not everyone believed that a recovery was close at hand.
``It comes down to end demand and how well that's tracking, and it doesn't seem to be doing all that well, from what we can tell,'' said Lehman Brothers analyst Dan Niles.
SLACK-WATER CONDITIONS
But industry analysts said the personal computer sector had hit a low, at least in the United States.
``We're in slack-water conditions -- that period between the tides when the sea is fully out but has not yet come back in.'' said IDC analyst Roger Kay. ``The good news is that the U.S. market has truly reached low tide and is turning around, albeit slowly.''
Gateway Inc. (NYSE:GTW - news), which has been forced to retrench, pulling out of foreign markets amid fierce competition and slack demand, said it may have hit a turning point.
The company, based in Poway, said it expects to maintain flat revenue in the second quarter, when computer sales to consumers typically decline.
``Momentum is starting to swing our way,'' said Chief Financial Officer Joe Burke.
He cited a smaller than usual seasonal decline in the first quarter from the fourth quarter, which benefits from holiday sales, as reason to believe Gateway could continue to improve in the coming months.
``Historically, the fourth quarter to the first quarter is a 10 percent decline in unit sales. We're only down 5 percent. The second quarter is usually down 5 percent. We're saying it's going to be flat. That shows our value pricing strategy is working.''
Apple Computer Inc. (NasdaqNM:AAPL - news) said demand for its new iMac had not slowed, even after it raised the price by $100 to reflect higher components costs.
Microsoft Chief Financial Officer John Connors said PC demand, which Microsoft had earlier estimated would fall in the mid-single digits in the June quarter, now looked like it would be flat or down only slightly, restarting growth after that.
``I wouldn't call it a robust recovery, but the direction is more positive than over the last 18 months,'' Connors said. |
