Steve:
Please note that most of my postings relate to the PC industry in general, and rarely to CPQ specifically. My interests in the tech sector go well beyond CPQ.
With respect to your other comments:
Europe:
I too noted CPQ's comments in which the company indicates that their European sales are picking up nicely. We shall see. Over the entire year, and for all computer companies, Europe has been disappointing. Sales growth has been lousy and has only picked up in the last two months (due to cheap computers). Andy Grove and his gang have been making speeches all over Europe warning them that if they don't get into PC's they'll be "left behind" (whatever that means). Unemployment is very high across Europe (UK excepted). I'll wait for hard numbers rather than relying on what may be turn out to be inaccurate information or hype. Incidentally, is that supposed 35% gain in revenues or in units? I'd bet a CPQ power button that its the latter, and with selling prices down 50%, one has to make twice the sales to generate an equivalent revenue stream.
Asia:
On what basis is your 5% decline in Asian sales based? This does not jibe with comments attributed to CPQ's marketing director for Asia, who was quoted 6-8 weeks ago (out of Korea) as stating that Asian sales were somewhat disappointing given earlier expectations. That is the only public comment that I have seen from CPQ about sales in that region.
I suspect that all PC manufacturers are going to experience dramatic shrinkage in sales into Asia, mainly because a PC is a discretionary purchase for both business and consumers. Both are proceeding through traumatic times, and all my contacts in that part of the world speak of little else. Contrary to CNBC, this Asian meltdown is not an insignificant event. Wealth has been destroyed both quickly and in historic proportions. Asians are now reluctant buyers of anything. The banks over there already have football sized fields of repossessed luxury cars and bloated portfolios of non-saleable seized real estate holdings. PC's will not be immune.
You are accurate with respect to the reduced costs for components, and reduced Asian labour costs....what you are missing is that sales will simply not hold up in the face of the economic collapse. Even small reductions in sales revenues can significantly disrupt profits in high fixed cost environments.
You mention having read reports of spending increases expected in Asia. They must be rather dated reports. My information is absolutely the opposite and suggests massive scaling back of expenditures in every economic sector. With respect to PC forecasts, I've had a bit of fun over the last two years in reviewing the forecasts of the likes of Dataquest in light of what actually transpired. To be charitable, they are almost always optimistic, which makes sense when one realizes that their revenues are largely derived from industry participants.
Your comment that Korean spending will decline only marginally because of the IMF bailout is inaccurate. Korean GDP growth will be cut in half on a best case basis, and that is an unmitigated disaster in anyone's book.
I follow currencies with great interest. The currency boys smell problems before the bond markets do, and the bond markets tend to react to problems well in advance of the stock markets. The last dollar-yen run-up was not based on the same factors that are driving this one. This one is based on exactly what several of us have been saying for many months....deflation.....too much capacity...too much loose money.....too much debt etc.
When the market is kind enough to provide vibrant warning signals to all but the blind that a deflationary crunch is underway, it's downright foolish to bury one's head in the sand. Much of the so-called profits currently driving our insane markets are a sham. I enjoy digging into the details of company statements, and in far too many cases, the reported profits are based on one-time-only benefits, or accounting sleight-of-hand, such as artificially lowered interest rates resulting from philanthropic foreign central bank treasury purchases, the raping of precious cash holdings to buy back stock, the inflating of revenues through derivative adventures (especially the sale of put options), the reduction of tax expenses resulting from massive insider selling of options, the capitalization of what would normally be expenses, the reduction of normal depreciation, and a mountain of accounting chicanery. The Bank Credit Analyst has an article on this in their current issue and others have been writing about this for many months.
With respect to your request (demand?) that I answer specific questions that you chooses to ask, be aware that I don't operate that way. I don't post to display competence, I post to try to both provide and acquire information.
I'll readily admit to being long winded at times, (the aging process or a lack of good communication skills), but on the other hand, I'm frequently absent for weeks at a time, so the average is probably acceptable. (g) .
Best, Earlie |
