If Intel carries over their momentum from last week, it could turn out to be quite a week for INTC investors!
Here is a rather disturbing article for Intel and AMD investors alike.
March 1, 1999
Compaq Warns of Weaker Demand
For PCs as Sales Fall Below Forecasts
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
Compaq Computer Corp. warned of lower-than-expected demand for its
personal computers, compounding concerns by some analysts that growth in
the $174 billion world-wide PC market may be nearing an end.
The world's largest PC maker said sales for the quarter ending March 31
were running below its projections because of weakness in North America
and Europe, which accounts for the bulk of PC sales. "In January, our sales
were lower than we expected and it spilled over into the first week of
February," said Enrico Pesatori, Compaq's senior vice president for
corporate marketing. "We can't pinpoint it to anything special," he said.
Compaq, of Houston, said sales to small and
medium-size businesses were weaker. Mr.
Pesatori said sales to large corporate buyers and
home-PC customers were within the company's expectations, and Compaq
doesn't believe the softness represents losses to rivals. "We see some
weakness in general in the market" in the two regions, he said. Compaq has
moved to reduce spending as a result of the slowing demand, Mr. Pesatori
said.
Gateway Inc. President Jeffrey Weitzen said the North Sioux City, S.D.,
company has also experienced what he called a seasonal slowing. "We've
been seeing relatively seasonal behavior. January was a strong month and, as
is traditionally the case, February got a little lighter."
Some analysts say signs of slowing growth amid falling prices may signal the
industry's growth era is winding down. "What I'm saying is 'sorry guys, the
party's over.'" said International Data Corp. senior analyst Roger Kay. "We're
within sight of the revenue peak in the consumer-PC market and not many
years away from the peak of revenue in the commercial market," he said. In
fact, because of rapid price declines in home-PCs, "It's possible the revenue
peak is already behind us" in consumer sales, added Mr. Kay.
A January poll of 13,500 technology firms by researcher Ziff Davis Market
Intelligence, La Jolla, Calif., found that new computer purchases by small
businesses fell 8% in January compared with the year-earlier period.
The same poll showed an increase in sales to medium and large businesses
that brought total unit sales up 3%. However, price declines likely will
produce lower overall revenue, theorized Aaron Goldberg, vice president at
Ziff Davis.
PaineWebber Inc. analyst Don Young said he believes demand this quarter is
running at half the 17% unit increase that he had been expecting. "We're
picking up signs in many different avenues of weak PC demand," he said.
Sales disappointments among computer distributors are pushing up their
inventories of unsold computers to 40 days of sales from 34 in the previous
quarter, he said.
Compaq's warning, coming days after Gateway's caution and a revenue
shortfall at Dell Computer Inc., triggered a broad sell-off in PC-company
shares. Compaq shares closed down 14%, or $5.625, at $35.375 in New
York Stock Exchange composite trading Friday while Gateway fell 9%, or
$7.4375, to $72.6875, also in trading on the Big Board. Intel Corp., which
makes the key microprocessor chips used in most PCs, tumbled 6%, or
$7.8125, to $119.9375 in Nasdaq Stock Market trading. |
