Leading Computer Systems Players Enjoying Vigorous Sales Resurgence -- Market Value Up 71%
SANTA BARBARA, Calif.--(BUSINESS WIRE)--Sept. 8, 1999--The composite annual sales growth rate for 10 of the leading publicly listed companies in the Computer Systems and Services industry has been on the rise for the past 4 successive quarters, hitting a vigorous 17% year-over-year growth rate in the 2nd quarter of 1999.
The group includes Apple, Compaq, Dell, EDS, EMC, Gateway, Hewlett-Packard, IBM, Sun Microsystems, and Unisys. Group revenue rose from $53.4 billion in Q2 98 to $64.1 billion in Q2 99, a 20% increase over the year-ago quarter.
The latest "Computer Systems Business Update" report by Prolytix Corp. is now available for viewing for one month free at prolytix.com.
According to the second quarter 1999 report, gross margin for this group held steady from last quarter at 31.5%, three points off recent cyclical highs. The inventory turn count continued its inexorable upward rise, ending the period at 11.5 turns per year, signaling that the manufacturing sector of this group is continuing its migration to a build-to-order business model.
These efficiencies in inventory management have helped the group to amass an all-time record cash hoard of $29 billion, giving them much-needed liquidity to fuel expansion and make strategic acquisitions.
The leaders continue to consolidate market shares, with IBM at 34%, Hewlett-Packard at 19% and Compaq at 15% of group revenues -- the other players were in the single digits.
Revenues in $ Billions Q2 98 Q2 99 Change
10 Computer System Companies 53.4 64.1 +20%
(Apple, Compaq, Dell, EDS,
EMC, Gateway, Hewlett-Packard,
IBM, Sun Microsystems and Unisys)
Now in its 4th consecutive quarter of growth, the computer systems
group shows little sign of slowing down. Compaq and Dell made the
largest gains in market share, primarily at the expense of
Hewlett-Packard and IBM.
Cash in $ Billions Q2 98 Q2 99 Change
10 Computer System Companies 24.5 28.7 +17%
(Apple, Compaq, Dell, EDS,
EMC, Gateway, Hewlett-Packard,
IBM, Sun Microsystems and Unisys)
Efficiencies in inventory management have helped the group to amass an
all-time record cash hoard of nearly $29 billion, giving them
much-needed liquidity to fuel expansion and make strategic
acquisitions.
While gross margins have held relatively steady over the past year, the group has regularly reduced overhead, bringing SG&A margin down from 18% this time last year to 15% in the most recent period. Sun Microsystems tops the list with the highest SG&A margin at 26%, while Dell Computer has the lowest at a trim 9% of sales.
Gross Margin Q2 98 Q2 99 Change
% of Sales
Ticker Symbol:
AAPL 25.7% 27.4% + 7.0%
CPQ 19.0% 20.5% + 8.4%
DELL 22.3% 21.5% - 3.5%
EDS 17.5% 17.6% + 0.7%
EMC 50.9% 55.8% +10.3%
GTW 20.6% 22.0% + 7.3%
HWP 31.7% 32.9% + 3.7%
IBM 38.0% 37.5% - 1.1%
SUNW 51.7% 51.9% + 0.6%
UIS 33.7% 34.9% + 3.5%
EMC, Compaq, Gateway and Apple improved their gross margins in excess
of 5% over the same period last year. Dell and IBM experienced some
slippage in this critical operational measure.
Technology markets require continuous development investments and the group R&D margin has held steady in the 5.0-5.5% range over the past year. The big spender in R&D was IBM at $1.3 billion (5.9% of sales), followed by Hewlett Packard at $800 million (7.0% of sales). Sun Microsystems had the highest R&D margin at 10.0%, followed by EMC at 8.6%; Gateway and EDS had zero R&D margins.
Two key measures have seen steady decline over the past year, leading to improvements in financial and operational efficiencies -- (1) Debt/Equity and (2) Plant Property & Equipment to Revenue Ratio. Debt reductions have been made possible by freeing up cash from operations. As a result, group debt to equity moved down from 0.58 to 0.51 over the past year. The company with the highest debt to equity ratio was IBM at 1.5, while Sun Microsystems had 0.07. Compaq and Gateway had no debt.
Build-to-order business models have moved companies toward fewer "bricks & mortar" and closer to a distribution model. The group PP&E/revenue ratio descended steeply from 0.64 to 0.52 over the past year.
The build-to-order business model also required major efficiency improvements in inventory management. Tossing the "hot potato" of inventory back and forth with suppliers, the PC group particularly fought to minimize its inventories by reducing commitment levels and requiring suppliers to deliver on shorter notice.
Component suppliers were forced to respond and become more efficient themselves; as a result, many industry sectors up and down the "food chain" (for example, disk drives) made 50% improvements in inventory turns over the past four quarters.
Public markets responded to the positive vital signs of this industry group to the tune of a 71% surge in market value for the group since the same period one year ago. You heard it right, 71%! Collective market value went from $380 billion in Q2 98 to $650 billion in Q2 99.
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