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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hpeace who wrote (10140)	12/4/1997 5:06:00 PM
From: Douglas Perkins	Read Replies (2) \| Respond to of 97611

CPQ & DELL are doing fine - here's why - from zdnet.com AST's woes spell doom for 'second-tier' PC makers By Margaret Kane December 4, 1997 10:05 AM PST ZDNN In its announcement Wednesday that it would lay off 37 percent of its workers, AST Research Inc. signified that it was essentially giving up on the corporate marketplace. Aside from a few large accounts, the company will focus its interests on small and medium-sized business. And while analysts could find plenty of missteps made by AST management, AST's decision also says something about the state of so-called "second-tier" PC manufacturers. Namely, they're in trouble. "No one who's not one of the big four can compete for enterprise business anymore," said Roger Kay, senior analyst at International Data Corp. in Framingham, Mass. "They have to say 'Where can we go?' In the consumer space, the margins are thin and the channel takes a big piece of the profits. The only place left is small and medium." The consumer business has already seen the shakeout. Toshiba America Inc. recently exited the business, unable to compete with the sudden rash of sub-$1,000 systems. Acer America Corp. has gotten itself out, and the long-time standby, Packard Bell NEC Inc., has stumbled recently, actually losing share in the third quarter. When market-research firms IDC and Dataquest Inc. released preliminary marketshare figures for the third quarter earlier this year, both firms seemed stunned at the consolidation in the top vendors. According to Dataquest's figures, the top six vendors in the United States accounted for 60 percent of shipments, compared to 52.3 percent a year ago. IDC's Kay said further analysis showed that the top four vendors, Compaq Computer Corp., Dell Computer Corp., IBM and Hewlett-Packard Co., all saw third-quarter growth between 50 and 60 percent. By comparison, the companies ranked six through 10 saw a measly 1.5 percent average growth. AST's share of the market has dwindled from 1.8 percent a year ago to less than 1 percent in the third quarter of this year. In a statement, AST CEO S.T. Kim acknowledge that the company can no longer afford to have the goal of "selling more PCs to more customers." However, there is some hope for companies that haven't made it into the top four spots. Growth at the bottom of the barrel is relatively strong -- about 9 percent in the third quarter for everyone not in the Top 10, according to IDC. And analysts pointed out that when you get to be as big as the top companies are, it can be even easier for a little thing to bring you down. For instance, most analysts attributed IBM's relatively poor showing in the third quarter to its slowness in recognizing the sub-$1,000 market. The company recovered, introducing a $999 system last month, but that one misstep was enough to hurt them. "The threat is very real to all of these companies. If you really bungle something you can be toast," said Nathan Nuttall, research director of Sherwood Research Inc. of Wellesley, Mass. "It doesn't take much to really have something explode on you in a destructive way, and that leaves the field pretty wide open."