Earlie,
Did you see this in the WSJ? In the middle of a fairly mundane article on Friday's PC stock declines, there's a quote that I could read as corporate PC units up 3% 1/99 over 1/98. Since it goes onto say corporate PC units were up 20% 1/98 over 1/97, and we're not thinkin' 1998 was all that hot as revenue goes.
Whadda ya think?
Peter
key quote:
<<But there are some answers -- at least to the question of how far demand
for PCs fell in January 1999. According to Aaron Goldberg, executive
vice president of ZD Market Intelligence, PC shipments in the U.S.
commercial market grew just 3% in January 1999 from January 1998, down
sharply from a 20% January-over-January rate in the year-earlier period.
"You start getting this kind of fall off in January and life does not
get very good," Mr. Goldberg said.>>
interactive.wsj.com
February 26, 1999
Compaq, Other PC Makers
Drop on Fears of Weak Sales
By NICK WINGFIELD
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Fears of weak January sales at Compaq Computer hammered
shares of the hardware giant and all of its peers, leading some analysts
to ask whether the personal-computer industry, brutalized a year ago by
a severe inventory glut, is headed for trouble again.
First-quarter estimate revisions by two firms, Credit Suisse First
Boston and Merrill Lynch & Co., triggered an 13% decline in Compaq
stock. It fell 5 5/8 to 35 3/8 on volume of 75 million shares, making it
the most actively trade issue on the New York Stock Exchange. Average
daily volume for the stock is 13.7 million shares.
None of Compaq's major competitors were spared in the sell-off: Dell
Computer fell 1 5/8 to 80 1/8 on Nasdaq, while Hewlett-Packard dropped 4
3/4 to 66 7/16 and Gateway slumped 7 7/16, or 9.3%, to 72 11/16 on the
New York Stock Exchange.
The Nasdaq Composite Index fell 38.79 to 2288.03 and Morgan Stanley's
high-tech 35 index dropped 26.50 to 933.91.
Credit Suisse PC analyst Michael Kwatinetz on Friday trimmed his
first-quarter profit estimate to 31 cents a share from 36 cents a share,
while lowering his revenue expectation to $9.8 billion from $10 billion.
Merrill analyst Steve Millunovich, meanwhile, cut his earnings estimate
to 30 cents a share from 25 cents a share. In a research note, Mr.
Kwatinetz said a recent excursion to Compaq headquarters had led him to
believe the company's early 1999 sales were slower than expected.
"Since Compaq appears to have had a shortfall in January, the question
arises: 'How is the industry doing?'" Mr. Kwatinetz said in the note.
"In retrospect, Dell and H-P's slight revenue shortfalls may have been
more of an industry issue than we previously believed."
In the case of Compaq, Mr. Kwatinetz pointed the finger at several
culprits: weak sales in U.S. and Europe, as well as the currency
devaluation in Brazil, which affected revenue and gross margins for
Compaq's business there. The analyst said overall gross margins are
solid and Compaq's seen no worrisome decline in the average selling
prices of PCs, a profit-eating phenomenon seen by PC makers who sell
cheaper machines.
The bearish Wall Street reports came nearly a year after Compaq warned
of a shortfall in its first-quarter 1998 profits as a result of a sharp
inventory build-up. Word of that build-up roiled much of the PC sector
for the early months of 1998. This time, though, analyst don't believe
PC distribution channels have been jammed with too much product.
"The chances of deja vu on terms of last year seems relatively
unlikely," said Richard Chu, an analyst at SG Cowen & Co. "I think we're
going in with less at risk from an inventory standpoint. But there are
question marks about the shape of final demand that are unanswerable."
But there are some answers -- at least to the question of how far demand
for PCs fell in January 1999. According to Aaron Goldberg, executive
vice president of ZD Market Intelligence, PC shipments in the U.S.
commercial market grew just 3% in January 1999 from January 1998, down
sharply from a 20% January-over-January rate in the year-earlier period.
"You start getting this kind of fall off in January and life does not
get very good," Mr. Goldberg said.
Mr. Goldberg's theory about the fall-off in demand echoes a cautionary
observation about the PC industry in the last few years, namely that
computer horsepower has vastly outstripped the requirements of today's
software applications. In other words, ordinary low-end computers can
handle most of the chores word processors, spreadsheets and other
programs can throw at them, Mr. Goldberg said.
That theme seems especially poignant this week, as Intel, the leading PC
chip maker, introduced the Pentium III, its latest superfast processor.
To market watchers like Mr. Goldberg, the additional speed may only
compound the industry's woes.
"The PC industry has been stuck with a large bill that's coming due and
no easy way around it," Mr. Goldberg said.
Friday's Market Activity
Elsewhere in the technology sector Friday, VLSI Technology surged 4 5/8,
or 43%, to 15 3/8 on Nasdaq. Philips Electronics offered to buy the chip
maker for $17 a share, or about $777 million (see article). Philips
slipped 3/8 to 69 3/4 on the Big Board.
Advanced Micro Devices slipped 1/4 to 17 7/8 on the Big Board. Desktop
personal computers running on microprocessors made by AMD outsold all
Intel-based desktop PCs in the U.S. retail market in January, according
to PC Data's January Retail Hardware Report (see article). Intel dropped
7 13/16 to 119 15/16 on Nasdaq.
Platinum Software fell 1 7/16, or 17%, to 7 1/8 on Nasdaq. First Albany
Corp. analyst Robert Kugel trimmed his 1999 earnings estimate to 56
cents a share from 81 cents, and his revenue forecast by $18 million. He
attributed the reductions to the "less than smooth" integration of
DataWorks, of San Diego, which the company acquired Dec. 31. About 16
members of DataWorks' sales force have departed, an exodus that will
hurt the company's business, he said. Mr. Kugel estimated that the
departed employees would have generated about $15 million to $20 million
in license revenues in 1999.
Intuit added 9 3/8, or 10%, to 98 15/16 on Nasdaq. The personal-finance
software maker posted slightly stronger-than-expected profit late
Thursday (see article).
Novell fell 1 1/2, or 7.2%, to 19 3/8 on Nasdaq. The network-software
maker reported net income that was in line with analysts' expectations
late Thursday as revenue climbed 13% (see article). |
