Analysts: PCs, chips may show gains
By Mike Tarsala, CBS.MarketWatch.com
Last Update: 3:30 AM ET Aug. 3, 2002
SAN FRANCISCO (CBS.MW) -- Reports on the computer and chip industries this week provided hope that long-struggling markets could soon see stronger demand.
Several long-time industry observers noted that retail PC sales, which have fallen for 18 months, showed month-over-month increases in both May and June. Also, chip sales in the second quarter rose 5.8 percent from the first quarter, due to an uptick in orders from computer makers.
To be sure, the minuscule sales gains aren't enough to make analysts pound the table about a resurgence. No one would listen if they did. Many analysts wrongly predicted a second-half recovery for the overall tech sector in each of the past two years.
But some analysts call this week's reports on PCs and chips evidence of momentum, and a reason to anticipate a more aggressive buying season in the fourth quarter -- the biggest retail sales period for most tech companies.
"Technology folks are starting to think more aggressively about purchasing more new PCs at the end of this year, going into next year," said Tim Bajarin, analyst with Creative Strategies in Campbell, Calif. He says customers are upgrading to new versions of Microsoft's operating systems.
Some of the product integrators who sell PCs to large corporations share Bajarin's optimism about the overall market.
"The level of committed business is a huge increase over the past couple of months," said John Shaffer, chief executive of Sysix Companies, a tech consulting and leasing company based in Westmont, Ill. "My customers' purse strings are loosening up for PCs and desktops. They're not looking at luxury projects, but they're pushing hard on consolidations and refreshing equipment that's been in use for two or three years."
Are PC sales bottoming?
Growth in the PC market still has the power to drive overall tech spending. Despite the long-talked-about demise of PCs, they still make up about 25 percent of all tech spending, according to Steve Baker, an analyst with NPDTechworld. The percentage climbs even higher when factoring in sales of printers, scanners and other peripherals, which are all tied to sales of new computers.
Not all news is good: The overall retail PC market continues to slide, according to Baker. He says total sales in June were down about 1 percent from 2001. And worldwide, Gartner Dataquest says full-year shipments could grow in a range of only 2 to 4 percent this year, as the industry has yet to see strong buying return.
Baker says that could be starting to change. Retail PC sales rose 24.2 percent in June from the previous month, and 4 percent in May, compared with April, which was the worst sales month in four years. Instead of being down 20 percent most every month, as has been the case for more than a year, the slowing declines may be a sign that the retail PC market is starting to scrape bottom.
"Things are still worse than last year, and last year was pretty bad," Baker said. "But this month was better than last month, which was better than the month before."
Total revenue in the PC industry, as opposed to sequential unit sales, continues to decline on a year-over-year basis. But that trend could reverse by August or September, Baker says, due to demand during the back-to-school shopping season that could beat weak year-ago comparisons.
Any PC revenue gain will depend on prices remaining fairly stable, according to Baker. His research shows that the average selling price of retail PCs was about $801 in June, which is perched just above the all-time low of about $798 set in 1999.
Strength in chips
Tied in with possible good news for the PC industry is a report from the Semiconductor Industry Association that shows second-quarter chip sales of $11.35 billion, up from the previous period. Strong chip sales to the consumer electronics industry in Asia helped fuel the growth.
Chip sales typically increase ahead of anticipated demand for computers, according to Bajarin. He says that a second-quarter sequential chip sales uptick may point to anticipated computer demand during back-to-school buying season.
Putting a damper on his argument, chip revenue slipped in June, the last and usually the strongest month in the quarter, according to the same SIA industry report. In particular, chip sales decreased in the Americas, compared with the previous quarter.
National Semiconductor (NSM: news, chart, profile), a significant supplier to Hewlett-Packard (HPQ: news, chart, profile), could have been a part of the reason. The company said its June sales were slower than expected for PC products and peripherals. National said the newly merged H-P and Compaq stopped ordering products for a time during June while they integrated their businesses. It caused the chipmaker to adjust its financial goals for the quarter.
But despite the slow June period, Bajarin says that most evidence suggests that a PC and chip recovery could be coming -- even though it's a story he acknowledges that shareholders have heard before.
"We in the industry will look at any numbers and see them as a positive right now," Bajarin said. "But it seems that parents might already be buying computers for kids going back to school. This is certainly a step in the positive direction."
Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com. |
