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The sub-$1000s have been picking up in momentum and sales since last February and this will continue, I think, for another 6 months at its current pace. The high end seems to suffer or is being redefined due to falling ASPs for computer components. So we might be seeing a strong low-end, a pretty strong middle market, and a considerable pause or transition away from what used to be high end machines--these machines might now be what a middle market PC is. I think the middle market and the low-end will continue to go in different growth paths. It is good for the industry to have a really low price point to make a PC affordable to a wider segment of the population, however, you get what you pay for. Expanding and upgrading these low-end machines is the catch--there is no room to add on for most of the ones I've seen advertised. When this is absorbed, there should be a lessening of growth in the low-end and ASPs (average selling prices) will stabilize. In the meantime, I think there will be decreasing margins for companies who make computer components for the low-end systems over the next six months or so. Intel is already feeling a pinch and they have cut their prices for various chips to compete and close out Cyrix and AMD--who produce cheaper chips for the low-end. Disk drive and DRAM components have also been declining precipitously over the past six months and this will continue. Lower component prices should aid MUEI, DELL, CPQ, and other PC makers since the price they pay for the components will be cheaper. The drag is DRAM exposure of some sort for MUEI. This glut will continue as long as new capacity comes on line and production is not cut back. If this scenario does continue for the next quarter or two, it could be shaky for earnings of PC component makers. Just my take. |
