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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Elwood P. Dowd who wrote (77576)	2/6/2000 10:32:00 PM
From: Captain Jack	Read Replies (1) \| Respond to of 97611

Why PCs Aren't Even Close To Being Dead By Michael Murphy Editor, Technology Investing December 6, 1999 Wall Street and the media have been saying for months that the PC industry is dead. But anyone truly tapped into the technology industry knows that they're absolutely wrong?and that their mistake could cost uninformed investors who listen to them thousands upon thousands of dollars in tech stock profits. It would be easy to make fun of Wall Street, which trashed a certain well known PC maker when growth "slowed sharply" from 50% a year to 38% a year. I'd think a company selling more than $2 billion worth of computers every month would be rewarded for growing 38% a year, but maybe that's just me. The PC was the first very high technology product that wound up on the average person's desk. Starting from zero, the PC industry will be almost a $200 billion industry in 1999. Yet Wall Street still hasn't figured out that this is a very seasonal business, which helps explain why they're so off target with regard to the industry's future. It also would be easy to make fun of the media. They are so confused about the difference between year-over-year growth and sequential growth, not to mention the impact of declining PC prices, that most of them think the PC business is shrinking. The truth is, 442 million PCs will be installed by the end of 1999?and it seems clear to insiders like myself that the PC revolution won't be over until at least 2.5 billion PCs are installed all over the world! The PC market grew 33% in 1999 and will continue to grow 20% a year for at least the next 5 years. Why? A consumer boom caused by cheap Internet-ready PCs, the reemergence of the Asian market, an explosion in e-commerce for small and medium size businesses, and innovative new products like the iMac, Windows 2000, and voice-recognition software are just a few of the factors that will drive strong PC sales for many years to come--whether Wall Street realizes it or not. PCs dead? They aren't even tired. Four companies now account for 40% of the worldwide market and are holding or gaining share. Compaq (NYSE: CPQ) maintained its #1 position in the first half of 1999 with a 14% share of the worldwide market, the same as in 1998. Dell (NASDAQ: DELL) has improved its #2 position from an 8.5% market share last year to 10% in the first half of this year. IBM (NYSE: IBM), the third-largest PC company, also improved their market share, in this case to 9% this year from 7.5% last year. Their portable ThinkPads and European businesses are very strong. The fourth-largest PC company is Hewlett-Packard (NYSE: HWP), which held their market share at 6%. Throw in Acer in Taiwan, Legend in China, and perhaps Packard Bell and Gateway (NYSE: GTW), and you have the cast of characters that will supply the vast bulk of those 2.5 billion PCs I told you about earlier. Very few companies have the international reach to come into this market at this late date. Brand loyalty builds repeat customers. Case in point: although Apple has a small market share, it has the #1 position for brand loyalty. How You Can Profit From Wall Street's Mistake The big driver of PC sales in 2000 will be the small business and SOHO--small office/home office--markets. Small-business use of the Internet more than doubled from 27% in 1996 to 61.5% in 1998 and will approach 90% by the end of 2000. There are 4.3 million small businesses on the Internet today; that number is growing at 23.5% per year. The number of businesses with a Web page is growing 103% a year, and the number with e-commerce capabilities is growing 138% a year, but is only up to 20% of the total. The Internet is the killer application. It's not just email, chat, search engines, or e-commerce. It is the whole experience as an application to be used to cut costs, as a channel to receive and deliver communications and as an information source. It's driving a worldwide explosion in PC sales that, in turn, drives an intense demand for servers and larger computers to connect all the PCs to the Net and serve up Web pages. Smart investors who understand the real PC story will earn tremendous returns in the months ahead. I've just unveiled to my clients my #1 pick in the PC business--a company perfectly positioned to profit thanks to its recent move into the high-growth sub-$1,000 market and its superior direct-to-consumer model. I think this stock will make us at least 50% profits in the next 12 months?and I'd love to tell you all about it.