PC industry on comeback trail
By Binti Harvey, CBS MarketWatch
Last Update: 4:16 PM ET Sep 17, 1998
NewsWatch
LOS ANGELES (CBS.MW) -- As global economic uncertainty sends
shockwaves through the broader technology sector, investors may be
wise to refocus their attention on computer hardware stocks, analysts say.
Industry observers say preliminary reports and
recent information indicate those much-maligned
computer and chip manufacturers may be poised
for a blowout third quarter.
"We typically expect a seasonally strong third
quarter, and it looks like it's turning out to be that
way," said Ashok Kumar, PC and chip analyst for
Piper Jaffray.
Investors pummeled PC and component
manufacturers in the second quarter as bloated
inventories and pricing pressures depressed profits.
However, PC makers and analysts have maintained that strong
back-to-school and Christmas season sales would resuscitate the industry
in the second half of the year.
"[PC makers] are expected to record 5.4 million shipments worldwide in
the third quarter, compared to 4.96 million in the second quarter," said
Erin Lawrence, PC analyst at Dataquest.
Early positive reports indicate that the industry is well on its way to
delivering a second-half recovery as promised. Analysts say a
combination of tighter inventory management and surging sales have put
the group back on track.
Chipmakers' bullish outlooks may be the most important sign of
improvement in the industry, Kumar believes. Earlier this month, Intel
Corp. (INTC) forecast 8 to 10 percent sequential revenue growth in the
third quarter based on strong demand from U.S. and European computer
makers. Analysts had been expecting flat to slightly higher sales.
Thursday, influential Merrill Lynch analyst Thomas Kurlak said Advanced
Micro Devices Inc. (AMD) has recorded better than expected sales of its
K6 chip, and noted that renewed demand is boosting average selling
prices for microprocessors. See related story.
"Intel's pre-announcement of positive sales is the key," Kumar said. "It
indicates the industry is doing well."
Analysts have also received good progress reports from Dell Computer
Corp. (DELL) and Gateway Inc. (GTW) in recent weeks. Speaking at
the NationsBanc Montgomery Securities stock conference in San
Francisco, Dell Vice Chairman Kevin Rollins said the company expects
the personal computer industry to continue growing at an annual rate of
about 15 percent for the next few years.
Rollins' forecast assumes significant acceleration in the second half of the
year, as the PC industry grew 11 percent in the first quarter and only 8
percent in the second quarter.
"Dell is seeing no signs of pain," said Steven Singleton, technology analyst
at Robert Van Securities.
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