PC Hardware: July Data Shows Robust Dealer Sell-Out
08:42am EDT 8-Sep-98 PaineWebber
* Sales out data for the channel remains robust for the fifth month in a row.
July dealer sales increased 53% as we continue to see an elastic market
response to sales incentives to clear excess channel inventories.
* The retail channel continues to recover after the slow down in May & June
related to the launch of Win98. Total retail sales out increased 26%
year/year which represents a big improvement over May/June.
* ASPs increased m/m in the retail channels although they are still down y/y by
17% in the retail channel and 12% in the dealer channel. The share of sub
$1000 PCs in retail remains stable at 45% while Pentium II sales have now
equaled Pentium I which accounts for the retail ASP firming.
* Compaq's sales strength was impressive with the strongest market share trend
in most product/channel categories. Retail sales were particularly strong,
increasing 65% after the slow down from the new consumer products
introduction in the prior two months. Dealer unit growth remained strong
with 58% growth y/y.
* IBM's performance was strong with a total increase of units of over 100%.
While IBM did have easy comparisons, the performance was nevertheless
impressive particularly in notebooks where IBM captured nearly 50% of the
notebook marketplace.
* HWP performance, after leading its peers for most of the last 6 months, was a
laggard with only 20% total PC unit growth. HWP was particularly impacted by
an usually tough compare in the retail channel where units were down 21% y/y.
And HWP's big push into notebooks was a flop in July as market share actually
decreased. Printer performance remained solid, with the fourth consecutive
month of double digit revenue growth (y/y), while holding overall printer
market share.
* Investment Recommendation: The indirect channel is poised for a strong
turnaround in profitability as excess inventories are eliminated from a
combination of strong channel "sales out" with depressed "sales in". This
latest Storeboard data reinforces the view that the industry is positioned to
restore profitability from a better balance between supply and demand. Our
favorite PC investments are the indirect players who have the most to gain
from a recovery of the channel particularly our Best Call - Compaq.
CPQ: Strongest Performance By An Indirect Vendor
11:30am EDT 8-Sep-98 PaineWebber
* Compaq had one of its strongest performances despite facing some difficult
compares. Retail performance was particularly strong with y/y unit growth of
65%. Total Compaq dealer sales increased 58%, slightly above the total
channel growth, in a period when the premium brands began to give back some
of the huge share gains made by virtue of their 'firesale' pricing to
liquidate excess inventories.
* Total sell-out was up 61% at the same time that Compaq was constraining
production to reduce channel inventory. We believe Compaq will need to
dramatically raise production rates between now and the end of the year to
meet demand after the liquidation of excess channel inventory.
* Compaq increased market share in most channel and product categories except
for dealer notebooks where IBM and Toshiba were the big winners. In July,
one out of every three PCs sold at retail was a Compaq.
* Within the dealer channel, Compaq ASPs fell slightly to $1894 from $1901,
while Retail ASPs rose substantially to $1,513 from $1,383, helped by the
shift to Pentium IIs. Compaq's Retail PII mix increased to 54% of sales in
July, from 35% in June.
* Investment Recommendation: The indirect channel is poised for a strong
turnaround in profitability as excess inventories are eliminated from a
combination of strong channel sales out with depressed sales in. This latest
Storeboard data reinforces the view that the industry is positioned to
restore profitability from a better balance between supply and demand. Our
favorite PC investment is Compaq who is leading the recovery of the indirect
channel and will benefit from financially and strategically from the DEC
acquisition. |
