All:
Here is the detailed on the comments made by Soundview on CPQ today:
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NEW YORK, Feb 21 (Reuter) - SoundView Financial Corp
analyst Mark Specker said he believes the personal computer
industry has seen its gross margins peak for the foreseeable
future and that many PC makers are likely to follow Compaq
Computer Corp (NYSE:CPQ) with price cuts in the second quarter.
"We have probably seen the top of PC gross margins for the
foreseeable future," Specker said. "They have been on a
climb...We will probably stop seeing any upside surprises on
gross margins in the second quarter."
Specker said that he believes other big PC makers will soon
follow Compaq's recent aggressive price cutting moves.
Compaq, which has the highest profit margins in the PC
industry, reported fourth quarter profit margins of 24.4
percent of revenues.
Earlier this month, Compaq announced price cuts on
desktops, portables, servers, workstations and networking
products in an attempt to increase its market share. The price
cuts will range from up to 17 percent to up to 27 percent.
"They have some gross margins to work with and they are
going to try and gain market share," Specker said. "Then
yesterday they brought out the $1,000 PC, which I had expected
later in the year."
Specker said that these moves by Compaq, plus some general
input he has received on the PC pricing environment, led him to
believe that other big PC makers will also follow with price
cuts.
"We will see some more aggressive pricing out there from
the big guys," he said. He expects price cuts to begin in the
second quarter, which will lead to revenue acceleration in the
third and fourth quarters of the bigger PC firms.
"So we are incrementally concerned about what we see in the
second quarter," he said. "I'm not expecting the kind of upside
surprise in margins (that was seen in first quarter)."
Shares of Compaq fell three to 79-1/2, Dell Computer Corp
(NASDAQ:DELL) lost 7/8 to 71-5/8 and Gateway 2000 Inc (NASDAQ:GATE)
dropped 1-1/8 to 60-7/8.
Specker said he did not change his earnings estimates or
ratings on any of the PC stocks that he follows.
"The intention was to give some color on the second
quarter," he said. "We may see a little downtick in the second
quarter in margins and we won't see incremental reveneues
(until the third and fourth quarters). |
