Very good points. Yes, your explanation is actually more accurate than mine, it's more overcapacity of existing fabs than new fabs. And yes, with SO many internet commerce stocks, it's hard to weed thru them all. Here's a good article from Monday's IBD:
PCs Out? Net Devices In? Market
Shake-Up Possible
Date: 3/23/98
Author: Norm Alster
Tech investors have shrugged off recent warnings of bad first quarters from
Intel Corp. and Compaq Computer Corp. What - us worry? Nothing goes
down for long in this market, the thinking goes.
But consumer-PC prices could be the exception.
So far, lower and lower prices have helped expand the home PC market.
But further gains may be tougher to come by. New competition looms
from cheap Net devices. And PC demand might not be as elastic as it's
been.
''The low-hanging fruit is gone,'' said Scott Miller, an analyst at market
researcher Dataquest Inc. ''It's tough from here on for the PC vendors.''
Nearly two years ago, IBD predicted that PC makers, stalled at under
40% household penetration, would have to slash prices to attract new
users. Since then, the sub- $1,000 PC has done so.
Consumer-PC sales in North America rose 19% last year to 12.6 million
units, says Hambrecht & Quist LLC. PC household penetration now
stands at 45%, says Dataquest.
So why might further price cuts fail to spark expanded unit sales?
One reason is that PCs now face competition from many new devices
designed for easy, cheap Internet access. (See related stories, this
section.)
Today, 96% of all Net access is through personal computers. But within
three years, over 40% of Internet access will be through these cheap new
devices, says market researcher International Data Corp.
These include Web-ready telephones -equipped with screens - and game
players, as well as TV set-top boxes, hand-held devices and
stripped-down PCs called network computers. IDC analyst Sean Kaldor
predicts more than 40 million of these devices will be sold in '01.
Many consumers want an easy-to-use alternative to PCs for Net access
and electronic mail. Roughly 42% of all U.S. households want to browse
the Web without the expense or hassles of a PC. And 39% want to send
and receive e-mail without a PC, says IDC.
Many PC alternatives are just now trickling to market. They might already
be pushing PC prices lower. ''Absolutely, there's an effect on PC pricing
from these devices. They drive PC pricing down,'' said Dataquest's Miller.
''(The devices) impact pricing because it's competition for the eyeballs, it's
competition for dollars.''
And falling consumer-PC prices are beginning to drag down corporate PC
pricing. Many corporate managers, says Miller, are questioning why
information-technology departments should spend $2,000 on desktop PCs
that aren't much different from $800 models at the local Costco or Circuit
City store.
On the consumer side, PC vendors are no longer cutting prices just to
snatch each other's share. Now they must hold off a whole new range of
powerful rivals. Asian consumer electronics giants and major telecom firms
are eyeing the market for low-cost Internet access devices.
''When consumers see that you can get on the Web and do all this fancy
stuff for $199, it gets harder for PC manufacturers to justify
$2,000-to-$3,000 PC prices,'' said IDC's Kaldor.
PC makers can't cut prices much below $700, Miller argues. But even if
they could, they might have trouble competing for phone and TV access
devices that are far easier to use.
Said H.L. Cheung, vice president and general manager of the Internet
Solutions Division of Cidco Inc., ''The PC has come down in price, but the
complexity hasn't.''
Enter the screen phone, now being marketed by both Cidco and Philips
Consumer Communications. Several Japanese firms also are planning
screen phones, analysts say.
Cidco's IPhone, introduced in January, promises ''ease of use and ease of
access,'' said Cheung. Equipped with a seven-inch liquid-crystal-display
screen, the IPhone is designed for the ''technophobic.''
Such people ''don't want to buy PCs, but they want to get instant access,''
Cheung explained. ''A lot feel that the PC is too intimidating. This device is
as easy as using the phone.''
Another early player in screen phones is Philips Consumer, a joint venture
of Philips Electronics NV and Lucent Technologies Inc. Philips this year
began selling both wired and wireless phone access to the Net.
''We identified this as a real market,'' said Louise Goss-Custard, executive
vice president of marketing and business development. ''There are certain
things, like checking e-mail, where people don't want to boot up a PC.''
With the screen phone, she says, they merely push a button.
The wired - like a conventional phone -screen phone sold by Philips
enables Web access, e-mail and voice mail. Input can be either typed or
handwritten. The wireless unit - which sends and receives faxes and e-mail
and offers Web access - is sold as an add-on to digital cell phones.
Wireless screen phones aren't likely to be favored for casual Web
browsing, says Philip Redman, an analyst with Boston-based Yankee
Group. But Redman expects them to carve out a niche among the 53
million mobile U.S. workers who want access to e-mail and their own
corporate intranets. Redman forecasts sales of 1.5 million Web-ready
wireless phones by '02.
Screen phone sales, says IDC, will total 7.6 million units by '01. Add to
these 13 million units of Web-enabled game players and 7.3 million set-top
boxes, and you have about two-thirds of the alternative Net-access-device
market. Hand-held computers and consumer versions of the NC also
figure in the 40 million-unit forecast.
Nobody is predicting that screen phones, set-top boxes and Web-ready
game players are going to displace PCs. But they will lure consumers who
continue to resist PCs as bulky, costly and difficult to use, say analysts.
Dataquest's Miller believes that over the next three years, lower-priced
PCs could run household penetration all the way up to 60%. But these will
be low-profit-margin sales for PC vendors. And the last 40% of
households will look to the phone, TV and other comfy PC alternatives, he
says. |
