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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: David Rosenthal who wrote (17406)	3/9/1998 11:56:00 AM
From: Proud_Infidel	Read Replies (1) \| Respond to of 70976

Seems INTC has been channel stuffing, a la Bill Clinton<GGG> From SBN: PC inventory 'blip' causing Intel's problems, says researcher SANTA CLARA, Calif. -- Despite Intel Corp.'s warning that slow PCs sales are eroding its first-quarter revenues, demand for personal computers remains strong and the chip giant appears to have fallen victim to an inventory blip caused by aggressive "channel stuffing" by system makers at the end of 1997, according to Computer Intelligence. The La Jolla, Calif.-based market research firm said 1998 started out with a strong January in terms of retail PC sales. The company's StoreBoard channel-tracking indices shows retail PC sales were up 35% and dealer channel sales up almost 10% in January compared to the same month a year ago (see index below). "Soft demand is not accurate, nor the complete story," Aaron Goldberg, executive vice president of Computer Intelligence. "Looking at the demand, it's easy to see that customer buying is still up, but inventory is up too, and there isn't enough demand uptick to offset the huge price declines. This is what caused the shortfall." Last week, Intel rocked the semiconductor industry and chip stock prices when it warned that its first quarter revenues would be 10% lower than its $6.5 billion sales in the fourth quarter 1997. The company blamed slower than expected PC sales (see March 4 story). On Friday, PC giant Compaq Computer Corp. of Houston added to concerns about the industry, announcing that it expected first quarter sales to be lower than expected because of excess inventory in the sales channel. Analysts and industry managers also have speculated that Intel was surprised by pricing competition and the strong growth of sub-$1,000 PCs. Computer Intelligence's Goldberg said price erosion and cheap PCs were not the main cause of Intel's problems. "From Intel's perspective, there probably wasn't enough percentage growth to offset the percentage price declines, and then the inventory situation tipped everything over," Goldberg said. "It's a delicate balance between price cuts to drive sales and enough sales growth to offset the price cuts, thus achieving the flat revenue Intel initially projected," he added. "Add a little excess inventory and the demand equation, from Intel's perspective, gets thrown completely out of whack." Goldberg said PC inventory was driven up when vendors "stuffed" more systems into the channel at the end of the fourth quarter. Because of the extra "stuffing" of systems into the channel, PC manufacturers saw the need to push out their component orders slightly, Goldberg said. (See Computer Intelligence's inventory index below.) "Sales are still strong, which helped get most of the inventory through the channel," he added. "But clearly there was still enough inventory in the channel after the vendors received their February sales data to cause them to push out future purchases of parts, including CPUs, to keep inventory in reasonable balance, and Intel was caught." PC Purchase Index Month Dealer Index Retail Index Jan. 98 1.08 1.37 Dec. 97 1.07 1.26 Nov. 97 1.14 1.25 Oct. 97 1.12 1.27 Sept. 97 1.16 1.35 Aug. 97 1.27 1.32 July 97 1.34 1.33 June 97 1.35 1.29 May 97 1.28 1.22 April 97 1.24 1.14 March 97 1.20 1.00 Feb. 97 1.17 0.93 Jan. 97 1.21 0.86 Source: Computer Intelligence StoreBoard Inventory Units as Percent of Total Sales in the Channel Month Percent Jan. 98 22.09% Dec. 97 18.94% Nov. 97 18.68% Oct. 97 20.95% Sept. 97 13.54% Aug. 97 14.06% July 97 12.84% June 97 12.48% May 97 17.87% April 97 20.95% March 97 19.00%