Thompson Kernaghan & Co. analyst Richard Woo advises investors to stay away from the technology sector at this time, with Asian currency weakness and uncertainty surrounding PC margins looming over the sector.ÿ
Woo said American chip makers, for example, will face severe pricing pressures from Korean dynamic random access memory, or DRAM, semiconductors. and "They can sell their components on U.S. shores at a much more competitive price than Texas Instruments and Micron," he said.ÿ
The analyst also expects countries in the Asia Pacific region to cut back on telecom infrastructure equipment spending.ÿ "That is going to hurt some of the networking telecommuncations firms and wireless firms," he said.
Asia was also supposed to be provide the next huge growth market for PCs, Woo said. ÿ "But they won't be buying any for a while."
Woo said that altough PC demand is growing --ÿ based on increased unit sales -- the increase is mostly due to the sub-$1,000, 166 Pentium-based PC.ÿ
"This is a psychological barrier now.ÿ Compaq ... will never be able to sell machines at $2,000, $2,500, $3,000 [to the consumer market] ever again," he said, adding that Compaq " has to sell two machines this year to equal the same price they got last year."
The above is what I meant by premium being removed from PCs. Greg ÿ
Computer retailers have already been cutting prices on the already value-priced PCs, Woo said, but will still be looking at "a lot of inventory in the channels" after Christmas.ÿ
"So they're going to have to discount some more.ÿ And they're not going to be buying new inventory replacement, and that's going to be reflected in the next quarter, when Dell and Compaq release [numbers]."ÿ
David B. Wilkerson is an online reporter for CBS MarketWatch. |
