To: Paul Reuben who wrote (34410 ) 3/15/1998 11:21:00 AM From: Mohan Marette Read Replies (4) | Respond to
The shape of things to come. Excerpts from current B. Week.PC biz.For private use only. - Source:Business Week.Before the PC is reinvented, though, the industry may have to revamp how it does business. Already, Wall Street analysts are making massive downward revisions on their earnings estimates for Compaq, Micron Electronics, IBM, and HP. Some analysts think PC margins may keep eroding to the range of consumer electronics. That means even greater pressure on manufacturers to slash prices and build market share. ++++DELL Inevitably, the result will be more industry consolidation. Analyst Vadim D. Zlotnikov of Sanford C. Bernstein & Co. figures the top five players command a 10%-to-13% cost advantage on key components over smaller rivals. Those five--Compaq, Packard-Bell, HP, Dell, and IBM--will increase their combined market share from 34% of PC sales in 1996 to an estimated 46% in 1998, he says, elbowing out AST Research, Acer, and Apple. ++++DELL Count on a continuing drive for market share among the leaders. Never mind that a failed market-share grab led to Compaq's first-quarter woes. Officially, the company blames disappointing demand. But rivals and computer distributors say much of Compaq's problem stems from special deals that the PC leader offered to get them to increase orders. ''LIKE A DOG.'' Meanwhile, IBM may have even more PC products sitting on dealers' shelves than Compaq. IDC analyst Jay Bretzmann says IBM has an eyebrow-raising 40 weeks' worth of PC servers in the reseller channel. Compaq has 16 weeks' worth, and HP some 10 weeks' --both closer to typical levels for these products. Wall Street expects bloated PC inventories to cut into first-quarter earnings, which IBM has already signaled could fall 10% below last year. IBM declines to comment. ++++DELL The result: Compaq and IBM will clear out inventories by slashing prices. That's going to put even more heat on second-tier players, already feeling the pinch of the new bargain-hungry PC buyers. Toshiba and AST left the home-PC business last year. Even IBM, which lost $300 million on its consumer PCs in '97, is growing weary. ''We're not particularly interested in chasing a lot of volume in businesses where we can't make money,'' says IBM CEO Louis V. Gerstner Jr. ''We'll be in the consumer-PC space, but we'll be there selectively.'' ++++DELL There's not much hope for getting customers to trade up to more powerful--and profitable--models anytime soon: There's no new software to overtax today's inexpensive but speedy Pentium machines. Existing PCs will run Windows 98 just fine, and Microsoft's industrial-strength Windows NT 5.0 won't be out until 1999. ''An 18-month-old PC may seem like a dog, but that's still a pretty nifty machine,'' says U S West Chief Information Officer David R. Laube. ''It can certainly think a lot faster than I can type.'' +++DELL That means computer makers must adjust costs now or wither. The No.1 cost-efficiency mantra is death to inventory : by letting resellers assemble computers as orders come in from customers, PC makers can limit the amount of inventory in stock and get it sold faster, before prices fall. Yet while Compaq and IBM intend to use such tactics, they'll still be far behind direct-sales juggernaut Dell Computer Corp. The build-to-order king, whose costs are roughly nine percentage points less than rivals, continues to roll along. Michael Kwatinetz of DMG Technology Group expects Dell to post a 50% jump in profits, to $294 million, on a 49% rise in sales this quarter. WOW Look at'em fly-50% sequential<?> growth in profits and 49% in sales,hey I can live with that for Q1. When others contracts DELL expands,need I say more.+++++++DELL Eventually, PC makers may have to think a lot bolder. ''The railroads thought they were in the railroad business--until cars, buses, and trains showed them they were in the transportation business,'' says Antonio Perez, head of HP's printer business. ''The PC industry has a chance to remain the center of the home-computing universe.'' But only if PC makers realize that as much as they've changed the world so far, they now have to change themselves--and ultimately, the machine that got them here........ Mohan: Moral of the 'story',-----competitors, ++++++++DELL.End of
