PC Sector Pessimism May Be Overdone, Investors Say
(Some resistance to the downward pressure, maybe...?)
biz.yahoo.com
By Peter Henderson
SAN FRANCISCO (Reuters) - Is the bottom going to fall out again?
That is the question technology investors asked after a string of June warnings from personal computer makers.
ADVERTISEMENT
"Is the bad news going to translate into the double-dip scenario?" asked Harshal Shah, a technology analyst at San Francisco fund manager Fremont Investment Advisors. "I guess people are kind of scared right now."
The first dip was 2001, when the PC market contracted for the first time since 1985, shrinking nearly 5 percent. Analysts hoped that was the worst and that there would be at least tepid improvement this year.
But Hewlett-Packard Co. (NYSE:HPQ - News) early this month said consumers were sluggish and even a modest recovery in technology spending would not happen this year.
Then Apple Computer Inc.(NasdaqNM:AAPL - News) fueled that fire on June 18, scaling back about 10 percent the sales forecast it had expected to achieve without an economic recovery. Chip makers AMD Inc.(NYSE:AMD - News) and Intel Corp.(NasdaqNM:INTC - News) also warned.
"The near term outlook is still pretty awful for the PC industry," David Dreman, chairman of Dreman Value Management, said.
"We just sold pretty much all of our tech stocks," he said. "There is so much overcapacity here that even if it picks up, I don't see much profitability here."
But troubles at HP, Apple and the chip makers may represent difficulties at the companies, rather than sectors, PC rivals and other investors said.
"We are on course," Mike Maher, a spokesman for Dell Computer Corp.(NasdaqNM:DELL - News) said on Friday. The No. 2 PC maker that expects 8 percent sales growth has another month left in its fiscal second quarter.
Technology researcher IDC Corp. recently raised its forecast for 2002 PC unit sales to 4.7 percent, expecting strength especially in the United States.
The economy is showing signs of hope that bode well for consumer buying, Fremont's Shah added.
"You've got people buying cars and houses. The consumer at least for the moment is still there," he said. "I'm just worried about some extraneous event."
A festering question is whether Apple's warning reflects industry-wide problems.
Apple said "dads and grads" shopping -- for Father's Day and graduations -- had not bumped up sales in May or June, suggesting the consumer was growing fickle.
But Salomon Smith Barney analyst Richard Gardner said the "primary culprit" for Apple was professional buyers waiting for new products or otherwise slow to spend.
"End-market demand is stable or declining generally in line with seasonal norms," he said in another report after checks with PC distributors. "The only portion of the market where we can find a decline in demand in excess of seasonal norms is U.S. retail."
Hewlett-Packard said in early June that resellers had roughly twice as much inventory as usual, and the glut masked demand, he added.
Gardner upgraded Dell two notches to buy from neutral, saying that he expected Dell would take market share from HP and Gateway Inc.(NYSE:GTW - News), the No. 3 U.S. PC maker, which focuses heavily on consumers and reports its quarter in mid-July.
"At the end of the day the only thing you have left to hang your hat on is valuations," Shah said, arguing the technology sector was cheap. "Earnings-wise it seems like a lot of the damage has been done."
wbmw |
