PC sales seen up through 2001
By Bolaji Ojo
Electronic Buyers' News
(09/11/00, 05:22:35 PM EDT)
NEW YORK -- PC OEMs apparently can rest easy for the next several quarters despite a troubling report last week warning of weakening sales at Intel Corp., the world's No. 1 microprocessor maker.
Attempting to drown out arguments to the contrary, the verdict from research firms and analysts is that rather than decline, PC revenue and unit sales will most likely maintain double-digit growth in the third and final quarters of this year and well into the first half of 2001.
The rosy projections emanating from OEMs, their component suppliers, and contract electronics manufacturers stand in stark contrast to a report issued by Ashok Kumar, an analyst at US Bancorp Piper Jaffray Inc. in Minneapolis, in which he warned of weaker performance from Intel. While global PC sales are unlikely to stagnate, concerns about the Santa Clara, Calif., semiconductor supplier's operations dogged the industry last week as analysts pushed opposing views about the company's short-term prospects.
Despite the dissension, indications are the PC market is still standing firm and is even set to sprint higher in the fourth quarter, once holiday buyers go on their year-end spending spree. Worldwide PC shipments are expected to climb 18.5%, to 33.4 million units, in the third quarter of this year compared with the same period in 1999, according to IDC, a research firm based in Framingham, Mass.
In the fourth quarter, the market will expand 20% year-over-year and 21% sequentially, led by the Asia-Pacific region and Japan, said Bruce Stephen, IDC's group vice president of worldwide personal systems research.
"There's usually a big uptick in shipment during the holiday season," Stephen said. "We're predicting worldwide growth of 16.7% next year; lower than this year, but still very good." That double-digit growth is being anchored by consumers, who have driven overall sales higher despite persistent sluggish growth in the corporate market.
"The consumer market will once again propel global PC growth this quarter," Stephen said. "Consumer demand for PCs is especially strong in Asian markets, and U.S. home-PC volume is expected to improve based on back-to-school issues."
The IDC said the Asia-Pacific will grow 36% in the current quarter, and Japan 35%. In the United States, third-quarter shipments are expected to climb to about 13 million units, up 13.4% from the comparable 1999 quarter.
"The heated growth in Asia-Pacific [excluding Japan] is based on thriving markets for consumer desktops and portables," IDC said in a recent report. "Japan's strong performance is pinned to consumer-PC consumption and an ongoing recovery in the commercial market."
While many industry executives agreed with the optimistic assessments of the PC market's immediate future, Kumar's advisory injected a note of caution. He said demand for Intel products is still weak, and various factors, including the possibility that fourth-quarter sales may be soft, could threaten the outlook. Intel, he said, could suffer from "inventory overhang going into the December quarter" if expected sales don't materialize.
"Coupled with the possibility that current manufacturing commitments for the December quarter may be too optimistic, this sets the groundwork for a malignant pricing environment," Kumar said. "Consequently, we also expect PC OEMs to post disappointing revenues for the [third] quarter," he added. A number of industry executives rejected some of Kumar's more dire assumptions. Manufacturers Services Ltd., a contract electronics manufacturer based in Concord,Mass., said that while PCs comprise only a small portion of its business, it has not seen weakness in its PC sector.
"The PC market isn't a huge one for us, but our outlook for that segment is extremely strong," said John Boucher, MSL's vice president of global supply chain. A spokesman for Micron Technology Inc. in Boise, Idaho, said the company has not seen any signs of a weakness in the PC market. "It's been business as usual: Demand continues to be strong, and we're not seeing excessive inventory," he said.
Other analysts, including Charlie Glavin of Credit Suisse First Boston Corp. in New York said Intel should see strong growth well into 2001. Glavin, who recently raised his earnings estimate for the company, said he expects Intel to ship up to 35 million processors in the current quarter. Although Kumar raised the likelihood that microprocessor oversupply could threaten Intel's ASPs, other analysts said demand for PCs remains strong and that the market can easily accommodate any extra output by Intel.
"The compound annual growth rate for the PC market over the next five years is under 10%, but that's still substantial for such a big market," said Jim Feldhan, an analyst at Semico Research Corp. in Phoenix.
Meanwhile, IDC's Stephen said the research firm's forecast can only be changed by a situation of oversupply or slowing consumer demand. Neither of these is likely in the current climate, he said. "There are certain small issues, such as scattered component shortages that may trouble the industry, but in general, most of the world's major markets are showing good growth across the board," he said.
--Additional reporting by Jennifer Baljko Shah and Claire Serant |
