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To: ms.smartest.person who wrote (2050)	11/6/2001 11:49:20 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

Slower PC sales may dent Legend profit Wednesday November 7, 8:36 AM By Tony Munroe HONG KONG (Reuters) - A surprising slowdown in China's personal computer sales growth in July-September is expected to take a bite from profits when top PC maker Legend Holdings Ltd reports quarterly results on Wednesday. Analysts expect Legend to post earnings of about HK$208.9 million (US$26.8 million) for its second quarter ended September 30, according to the average of six investment houses surveyed by Reuters. Some downgraded their forecasts following the recent release of disappointing market data. The profit forecasts ranged from HK$175.3-$243 million. Legend earned HK$217 million in the year-ago quarter, although that figure is not comparable because it includes the Digital China distribution arm that has since been spun off. Some analysts figure Legend's year-earlier pro forma profit was roughly HK$172-175 million. Many industry watchers also expect Legend will slash its sales forecast of 3.7 million PCs for this fiscal year. "It's a cinch they cannot meet that now," said Nomura analyst Theodore Teo, who recently cut his shipment forecast from 3.5 million PCs to 3.1 million and expects Legend to post earnings of HK$183 million for the quarter. Acknowledging weak market conditions, Legend said on Friday it would cut 500 jobs, or about 10 percent of its office staff, by March. Salomon Smith Barney analyst Chong Ghee Pek expects Legend will ship 2.96 million PCs this fiscal year, and expects quarterly earnings of HK$205 million. He also expects that Legend's gross margins narrowed to 13 percent during the quarter from 15.5 percent in April-June. CONSUMERS DISAPPOINT While PC growth in China remains strong relative to the dismal picture almost everywhere else, July-September numbers recently released by International Data Corp showed shipments for China and Legend in particular missed expectations. IDC said Legend shipped 660,000 PCs during the quarter, although the research firm's figures typically lag Legend's own. Morgan Stanley analyst Viktor Ma expects Legend shipped 780,783 PCs in the quarter, compared with 717,478 a year earlier and 651,594 in the previous quarter. He forecast revenue for the quarter of HK$5.3 billion. In China, where Legend owns a commanding 30 percent market share, IDC said year-on-year PC sales rose 12.9 percent during the quarter, short of IDC's 19 percent growth forecast. Legend executive director and senior vice president Mary Ma told Reuters recently that consumer demand during the usually strong back-to-school quarter missed expectations, partly because sales were so strong the year earlier that there was little pent-up demand left. Last year, Ma said, "people overspent their money -- or the market overspent." Nomura's Teo said demand from both consumers and multinational corporations was weak during the quarter, while sales to government and local companies remained healthy. Investors, who were once enthralled by the growth prospects of China's PC market and Legend's dominant position within it, have been drastically scaling back expectations, selling the stock down to as low as HK$2.50 in mid-September from a peak of more than HK$17 in early 2000. While many investors still believe Legend is a well-run company in a healthy market, they also appear to be realising that its once-steep growth trajectory cannot last forever, with intensifying competition exerting pressure on margins. "While Legend is still growing, it is becoming apparent that both the China PC market and Legend's growth momentum are decelerating fast, significantly below the optimistic forecasts the industry and the company had made at the beginning of the year," Morgan Stanley's Ma wrote in a recent research note. sg.news.yahoo.com