Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (7376)	12/12/2002 5:30:17 PM
From: Terry D	Read Replies (2) \| Respond to of 95515

Bear Stearns Equity Research PC Hardware; Enterprise Hardware, Data Storage, Storage Networking, iAppliances Sent: December 13, 2002 Computer Week In Preview: December 16, 2002 Ten Predictions For 2003 Key Points * As we look into 2003, we want to highlight ten predictions for the broader computer sector. While some of these are ongoing and some have yet to unfold, we believe that these are important issues for investors. Though we are not optimistic about IT spending trends until 2H03 because of macro indicators, we do think that leaders will extend their lead - hence our favorable view on Dell and IBM. * To summarize, our predictions encompass the outlook for IT spending, potential for several emerging killer apps, the likelihood of continued pricing pressure (for components, enterprise hardware and broader storage), the growing rivalry between Dell and H-P, our view on the outlook for Itanium, the potential for management departures, our premise on leaders vs. laggards, and stock seasonality. Ten Predictions for 2003. Predictions are hard, to paraphrase Yogi Berra, especially about the future. Nonetheless, here is a shot at the most significant investor issues in the computer segment in 2003. While predictions are subject to many outside factors, our largest caveat would be the timing or occurrence of a war or major terrorist incident. 1. No turn in IT spending before second half. Given that the leading indicators we focus on - especially consumer confidence - remain weak, we think that the earliest possibility of an upturn would be the second half of 2003. As to what could drive that turn, we think growth could emerge from a combination of a better economy, a stronger replacement cycle/replenishment cycle, and killer apps. 2. The Killer Apps. The highest growth segments, i.e., the killer apps, in 2003 are likely to include wireless computing, broadband to the home, digital imaging and portables. The beneficiaries of these trends would be Dell, H-P, Lexmark, and Synaptics. We also think that 2003 could be a breakout year for other types of handheld devices incorporating 2.5G telephone functionality, which could benefit Research in Motion, although competition will intensify from the Pocket PC camp. 3. Pricing pressures will remain intense in the enterprise segment owing to the confluence of trends - pressure by customers to consolidate resources for better utilization, lower-cost solutions such as Wintel/Lintel, and a greater push in the enterprise by the low-cost vendor Dell. 4. Component pricing pressures should accelerate. Although component prices have mitigated in the fourth quarter, there is the potential for an accelerating pressures in the first quarter 2003 owing to seasonal declines in demand and the potential for component vendor focus on market share. 5. Dell/H-P rivalry is likely to intensify. With Dell targeting each of H-P's markets/profit pools, the competitive battle between the two has already intensified. With H-P having signaled its intentions to be price aggressive, the competitive element is likely to deepen further in 2003. 6. Intel's 64-bit computing architecture adoption is likely to remain slow in 2003 owing to the complexities in transitioning applications to a new microprocessor instruction set. 7. Storage price competitiveness is likely to intensify in nearly all product areas as well as in storage networking. This trend is likely to unfold owing to overlapping product lines across the vendors, new entrants into a market or product category, more narrow differentiation (particularly in storage subsystems), and Dell's push in storage. 8. Leadership companies will extend their leads over laggards. IBM, with its recent IT Services and Software acquisitions (and more likely to come), will move ahead differentiating itself from its peer computer companies. 9. Management: the CEO of a major enterprise hardware company is likely to leave during 2003. 10. Stocks are likely to return back to "normal" seasonality, i.e., a January rally, followed by a weak spring and a bottom around mid-year