News:
Wednesday December 16, 8:25 AM (EST)
Future Looks Bright for PC Industry, Says Deloitte Consulting PC-CITE Report
SAN JOSE, CALIF. (Dec. 16) BUSINESS WIRE -Dec. 16, 1998--
Optimism Attributed to E-commerce Shift, Apple's Rebound
and Fizzle of Asian Crisis Impact on PC Makers
The future looks bright for the personal computer (PC) industry, according to the PC Critical
Industry Trend Evaluator (PC-CITE) report released Wednesday by Deloitte Consulting's High
Technology Group.
The PC-CITE report, which covers the third quarter of 1998, indicates that short-term optimism
is at a five-year high. This finding is supported by the 30 percent increase in the report's
Expected Performance Index (based on the forecast for short-term cash flow return on
investment) after declines for the previous two quarters.
"The stock market is already beginning to reflect this optimism with stock prices of major PC
makers outperforming similar businesses (software, semiconductors, semiconductor equipment and
peripherals) by 4 percent/a in the last three months," said Charles B. Goldenberg, partner in
the High Technology Group of Deloitte Consulting in San Francisco.
"In fact, this optimism validates the findings of last quarter's PC-CITE report. We are now
coming into the long-term optimism predicted in the PC-CITE Q2 1998 report, resulting in this
increase in short-term expectations for the PC industry."
The PC-CITE report attributes the optimism to significant changes in the PC industry, including
a shift to new channel strategies, primarily e-commerce, Apple Computer's rebound and the
realization that the Asian Crisis is not going to greatly impact the PC industry, indicated
Goldenberg.
Long-Term Optimism Also Near its Five-Year High
The PC-CITE Hope Index, a measure of investors' long-range expectations, has maintained a ratio
near its five-year high reached in the second quarter of 1998. In fact, long-term expectations
for every PC maker in the PC-CITE report have increased from two years ago.
Optimism for Apple is the single biggest contributor to the increasing trend in the Hope Index.
Apple has rebounded with its introduction of the iMac, surprising Wall Street and capturing the
imagination of PC consumers, according to Goldenberg. This renewed optimism has moved the
proportion of Apple's value derived from future investment and performance from zero in 1996 to
40 percent today, according to HOLT Value Associates.
Increased Gross Margins Show New Strategies are Working
The Gross Margin Index increased by more than 13 percent, which nearly returned it to its
five-year high. Goldenberg said, "This up-trend is the result of the PC industry making
significant changes very quickly, including taking advantage of the e-commerce explosion,
streamlining inventory operations and bringing exciting new products to market. These shifts in
the way PC makers do business have helped it rebound from the doom-and-gloom of earlier this
year."
"It also helps that the Asian flu appears to be a case of the sniffles for the PC industry. In
fact, growth projections for 1999 PC shipments in the Asian market indicate that it will pass
up the European market," he said.
"To put that into perspective, Europe is expected to surpass the U.S. as the fastest-growing PC
market in 1998, so the projections for an even larger Asian market indicate additional optimism
for the U.S. PC industry." (IDC's report dated 10/29/98 estimates 1999 growth of 17 percent for
the Asia Pacific market, excluding Japan.)
Hybrid Channel Strategies Make for Leaner, Meaner PC Industry
"Adopting new channels, most notably e-commerce, has also contributed to a leaner, meaner PC
industry," Goldenberg said. "In the past quarter, PC makers have made major shifts in their
inventory management, including a streamlined production output, filtering more product through
the supply chains and utilizing enterprise software programs to manage the flow of inventory."
"Despite the complexity of managing and integrating multiple sales channels, PC makers are
continuing to prove that they can respond quickly to market demands while managing their
inventories across the supply chain," he said.
PC-CITE's Combined Inventory Index for PC manufacturers, distributors/dealers and component
suppliers showed a substantial inventory decrease of nearly 18 percent this quarter. PC makers,
in particular, also showed substantial increases in sales resulting in the manufacturers'
combined inventory-to-sales ratio declining from .21 (Q2) to .16, close to its five-year low.
"The Combined Index is a snapshot of the PC industry as a whole. This decline is good news for
the PC manufacturers and shows that the supply chain is healthy," Goldenberg added.
The shift in inventory management strategies indicates that a new hybrid of distribution is
emerging. "Everyone in the chain is finding a new way to be profitable. Many players are
developing a hybrid distribution model that combines the best of direct and channel sales in a
multitude of venues, with e-commerce being the fastest-growing venue," Goldenberg said.
"Others will stick with the tried and true, but with a twist, such as selling direct online in
partnership with a distributor or retailer. The bottom line is that all the PC makers are
getting better at controlling their inventory levels."
PC-CITE's Supplier-Manufacturer Inventory Index, an index of suppliers' inventory ratio
relative to that of manufacturers, increased by nearly 8 percent this quarter with
manufacturers reducing their inventory levels even faster than suppliers.
Goldenberg said, "This index reflects the aggressive streamlining of inventory processes by the
manufacturers, coupled with the price reductions made by component suppliers, particularly
Intel Corp. and Advanced Micro Devices Inc., which drove this drop in supplier inventory
levels."
About PC-CITE
PC-CITE, a quarterly report from Deloitte Consulting, tracks the PC industry based on financial
data from PC manufacturers, component and peripheral suppliers, distributors and retailers, as
well as stock market indications (or indicators) of investor expectations.
The report highlights trends resulting from six key indices: Gross Margin Index, Combined
Inventory Index for PC Manufacturers, Distributors/Dealers and Component Suppliers,
Channel-Manufacturer Inventory Index, Supplier-Manufacturer Inventory Index, Expected
Performance Index and the Hope Index.
The Expected Performance and Hope Indices are provided by Deloitte/HOLT Value Associates, a
joint venture of Deloitte Consulting and HOLT Value Associates. In combination, these indices
present a snapshot of the PC industry. The Q4 1998 PC-CITE Quarterly report will be available
in March 1999.
About Deloitte Consulting
Deloitte Consulting is one of the world's top management consulting firms, providing services
to transform an entire enterprise -- strategies, processes, information technology and people.
It offers clients a very different approach, because its highly respectful, flexible and
collaborative working style gives the company an unmatched ability to transfer knowledge and
skills and generate employee buy-in.
In addition, the company focuses on the realization that changing business processes is
necessary to achieve the promised returns from strategy and technology.
Its approach enables the company to deliver very different results -- results clients can count
on because they can trust their performance improvements will not unravel once the company
leaves, results they can build on because these improvements make their organization more
robust and adaptable to future shifts in the environment.
Deloitte Consulting is an integral part of Deloitte Touche Tohmatsu, a global leader in
professional services, offering consulting, audit, tax and related services to clients
worldwide.
Deloitte Consulting. A very different approach. For very different results.
For a copy of the complete PC-CITE Report, call 408/993-4300 or E-mail requests to
hightech@dttus.com. Interviews and graphical representations of the indices are available upon
request by contacting Teri Bruno at 714/536-8407 or teribruno@aol.com. (a) HOLT Value Search,
11/27/98
-0- JV/np* JP/np
CONTACT: Teri Bruno PR
Teri Bruno, 714/536-8407
E-mail: teribruno@aol.com
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS COMED Today's News On The
Net - Business Wire's full file on the Internet
with Hyperlinks to your home page.
URL: businesswire.com |
