Rudedog and thread - Any comment on this scenario excerpted from today's Barron's?
Thanks,
John
Could conditions get any worse for the technology sector? Silly
question. Of course they can. Consider the recent prognostications
of Forrester Research, a Cambridge, Massachusetts, consulting
firm, on the outlook for personal-computer demand. Their forecast
starts with some good news. In 1999, Forrester contends,
companies will quicken PC spending in order to toss out older
hardware vulnerable to the dreaded Year 2000 bug. Forrester says
PC units shipped in the U.S., including home and business desktop,
laptop and server models, should jump more than 14%.
But here's the bad news: Before the end of 1999, Forrester asserts,
PC purchases will slow dramatically, as companies seek to avoid
screwing up newly Y2K-compliant systems. By mid-2000, Forrester
says, PC makers who had boosted production to meet strong 1999
demand suddenly will have excess capacity. Unit volumes in 2000
will drop below 1999 levels, they predict. As demand falls, PC
makers will slash prices. Revenues, Forrester asserts, will shrivel.
"Corporate buyers are pretty conservative, by and large," says Carl
Howe, Forrester's director of computing strategies, and the author of
Forrester's gloomy new forecast. "They've got to get
nonY2K-compliant stuff out of there. They'll kill off PCs running
Windows 3.1 or DOS as much as they can. Anything not built in the
last two years is likely to be non-Y2K compliant. In 1999, Dell, IBM,
Hewlett-Packard, Compaq and Gateway will all benefit from higher
desktop computer sales." Overall, Forrester expects U.S. PC
revenues next year to inch up to $55.2 billion, from $53.5 billion this
year.
However, the scenario shifts by next year's second half, Forrester
says. "IT managers will be conservative going into the year 2000,
and the worries don't evaporate January 1," says Howe. "Our view is
we'll see a freeze on corporate computer buying at some
companies through mid-2000." Unit demand should start to recover
in 2001. But with pricing expected to crumble, Forrester expects it to
take even longer for revenues to return to earlier peaks.
"The best of times," warns Howe, "will be followed immediately by
the worst of times." Forrester expects U.S. PC revenues in 2000 to
plunge about 14%, to $47.4 million, with zero growth in the
subsequent two years. The fallout would be widespread. "Who will
get hurt? Look back into the supply chain," Howe says. "It's anyone
who has a per-PC revenue model." He sees problems for peripheral
makers, like Creative Labs and Lexmark, consulting firms, like
Vanstar, and component companies, like Intel. Even real-estate
brokers who cater to the high-tech industry will suffer, Howe
maintains.
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