Thread,
Here is an interesting report:
PC Industry: Insights From Our European Tour
06:43am EST 10-Mar-99 Salomon Smith Barney (GARDNER)
SUMMARY:
*We spent last week in Europe with management from several large
PC manufacturers and wholesale distributors. Our impression is that
European corporate demand was softer than expected during February
following a solid January.
*In the U.S., we believe that corporate demand was slightly below
expectations during January and the first half of February, based on
channel checks as well as comments from certain PC vendors.
*We believe that the confusion in the PC space this quarter is a
combination of soft demand and increasing competition in the
corporate arena. Net, net, all of the major vendors are attempting
to grow at above market unit growth rates at the same time that
demand has softened.
*March is the swing, but must be quite strong to offset Jan/Feb
conditions.
OPINION:
*One of the larger resellers of PCs into the U.S. Fortune 500 has
commented that bidding activity during 1Q was solid, but that the
bids did not translate into orders. This is very consistent with
commentary from HP and Dell and suggests the possibility of a
pick-up during 2Q.
*The good news this quarter is that the major vendors seem to have
inventory discipline. We have not picked up any signs of buy-ins or
extended price protection in our conversations with corporate
resellers or distributors.
*Our conversations with HWP in Grenoble last week suggest that HWP
plans to get more aggressive in large accounts during coming
quarters. HWP believes that a working knowledge of how to compete in
the PC portion of the business is critical to its longer-term
success in other product areas.
*We are maintaining our Buy ratings on Compaq and Gateway, and our
Neutral ratings on Dell and Apple. Despite Compaq's difficulties this
quarter, we believe that investors should look through near-term
market conditions to the longer-term opportunity. Gateway's March
quarter is tracking to expectations, but we see earnings upside
throughout 1999 due to the continued Country Store roll-out, a
European turnaround and the company's new Internet/E-Commerce
strategy. We continue to perceive risk in Apple and Dell's calendar
first quarters. |
