PCs: Goldman Cuts Estimates, Commercial Sales At Risk
By Tiernan Ray
Goldman Sachs hardware analyst Bill Shope today cut his outlook on personal computer hardware sales this year to 3.6% growth from a prior 6.4%, and he predicts earnings reports by Dell (DELL) and Hewlett-Packard (HPQ) next week “will show signs of continued PC demand weakness and moderating server unit trends.”
HP reports earnings next Wednesday, after the bell, while Dell reports results on Tuesday after the bell.
“We would note that our latest Goldman Sachs IT spending survey (conducted in April 2011) suggests that the corporate refresh cycle may be waning,” writes Shope, “as over half of the respondents to the survey expect PC units purchased to increase by 5% or less in 2011.” He notes that commercial PC purchases in Q1 declined form 8.8% growth in Q4 to just 3% growth, on an annualized basis. Even with a consumer recovery in purchases, the PC market could still see “zero growth” this year, he thinks.
Shope is also worried about prices for PCs, as “we fear that PC pricing will resume more normal rates of decline as we approach the second half of the year.”
Shope lowered his tablet computer estimate as well, to 57.7 million units this year, from a prior 60.1 million units, and lowered his 2012 outlook to 78 million units from a prior 80 million estimate. But most of that is on reduced outlook for tablets based on Google’s (GOOG) “Android” software: “We have raised our forecast for Apple’s (AAPL) tablet market share to 66.4% in 2011 (64% prior) and 66.6% in 2012 (65% prior). This is consistent with our expectation for a downward bias to Android tablets in 2011.”
Shope actually raised his EPS estimate for Dell’s Q1 by a penny to 43 cents, which would meet Street consensus, he notes. But he thinks revenue could miss the average $15.4 billion estimate by $100 million.
He thinks HP may miss the Street consensus of $1.21 by a penny, but his main concern is the company’s forecast for the full year of revenue in a range of $130 billion to $131.5 billion, and EPS of $5.20 to $5.28, is too high. He expects just $129 billion and $5.05 per share in profit.
Apple and EMC (EMC) remain Shope’s top hardware picks.
HP shares today are down 49 cents, or 1%, at $40.39, while Dell shares are off 16 cents, or 1%, at $16.50. |
