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To: spitsong who wrote (46084)	7/19/2005 2:22:36 PM
From: RX4PROFIT	Respond to of 213182

CSFB CPU Sector Review 7-19, AAPL Benefits PC Hardware The Results Are In: Q2 Was Strong; Raising Industry Estimates Strong 2Q. Gartner and IDC released preliminary 2Q05 PC results that indicate unit shipments came in at the high-end of normal seasonal patterns, declining 3% sequentially, ahead of the average 6% decline normally exhibited in 2Q. On a year- over-year basis, shipments accelerated to 14.8% according to Gartner and 16.6% according to IDC, above recent low double-digit growth levels. Note: CSFB uses Gartner for its historical modeling purposes. Notebooks Lead The Way. Although the preliminary estimates do not include shipments by form factor in its preliminary analysis, we estimate notebook PC unit sales increased 33% y/y in the quarter. Meanwhile, desktop sales likely increased 8%, ahead of our 2Q estimate of 4%. Vendor Shakeup: A Few Familiar Names, And a Few New Ones. After delivering decelerating growth in C1Q, Dell rebounded to deliver 24% shipment growth and capture 130 basis points of market share y/y. HP’s growth slightly outpaced the market at 16.5% y/y, while Lenovo (including IBM) grew 11% y/y, but lost 30 basis points of share owing to disruptions from the IBM transaction. Apple delivered 35% y/y growth on the heels of strong desktop sales, posting its third consecutive quarter of share gains. Regional Report: US and Japan Lag. From a regional perspective, growth in the US rebounded to 10% y/y, but continues to lag the overall market. Meanwhile, EMEA (+19% y/y) once again delivered solid growth, which is inconsistent with recent negative company commentary regarding demand in the region. Rounding out the key regions, Asia-Pacific delivered 17% y/y growth, while Japan continues to lag with 5% growth. What Does This Mean for Our Estimates? If the industry were to complete the year with normal seasonal patterns (+9% q/q in 3Q and +14% q/q in 4Q), then PC shipments would grow 13% in 2005. Conversely, if our current estimates remain unchanged, PC units would likely increase 9%. We believe PC shipments will closely trail, but not exceed, normal seasonal growth patterns for 2H based on our expectation that desktop will continue to lag and that the current strength in Europe is unsustainable. With that in mind, we are increasing our PC unit growth estimate for the year to 11% from our previous estimate of 8%. Our notebook estimate increases to 30% y/y (from 24% y/y) and our desktop estimate goes to 5% (from 3%). Own The Profitable Share Gainers. We continue to believe investors should look to the companies that can profitably gain share in the current environment. Within our coverage universe, we believe Dell and Apple are best positioned to benefit from the improving growth profile. The improved PC market outlook should ease investor concerns regarding Dell’s ability to hit the Street’s 17% y/y revenue growth target for FY06 (Jan). Meanwhile, we believe Apple will continue to benefit from improved brand awareness, mass-market pricing, and general apathy for Windows products on the part of the current Microsoft installed base.