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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: jim kelley who wrote (105740)	2/28/1999 7:57:00 PM
From: Gabriel008	Read Replies (3) \| Respond to of 176387

Jim, ZD research re. January 1999 & q1. February 26, 1999 Q. What Do the Workplace PC Purchase Index & Compaq's Stock Price Have in Common? A. They Both Went South Friday was not a good day on Wall Street if you were a big shareholder in Compaq, HP, Dell, IBM, or Gateway. Based on stock analyst's comments that growth looked spotty, the market caps of all these big players took a bit of a beating. We here at InfoBeads weren't surprised. At the end of January we alerted our readers that the Workplace PC Purchase Index in the US was turning down, and now that we have the January data, our fears are confirmed. The January results show a pattern that is not positive for Q1 earnings. While most of 1998 showed index numbers that translated into roughly 20-35% growth in unit shipments for a given month over the proceeding month, the January index shows only 3% growth over last January. In fact, there are good reasons for this tailspin. Source: Projected Market Monitor The PC market has indeed lead a charmed life. However, the last 18 months have shown some really troubling issues. First, pricing is dropping. True, it's not in the freefall of 1997, but we're still looking at 1-3% declines, on average, each month. That can be dealt with when growth in units is robust, but if that falls off......... We've been lucky with stellar growth rates in all sectors, but Asia is still hobbled, retail US sales are stuck around 15% growth, and now the commercial market, home to higher ASPs in the US, is lame. Also, an issue I've discussed often is that software and application usage patterns are stagnating. There really is not much new in the way of software, and the buying impetus from Windows/2000's launch has evaporated as the product has had more slippage than the completion date of a River Phoenix movie. So if you're using the same old software, and a robust new operating system is not on the short term horizon, why buy a new system. The bane of Intel's, Compaq's, Gateway's, Dell's, Seagate's, and every other PC maker or allied supplier financials is that there's nothing the old 166 Pentium in the closet can't do, at least for most users. And the market is far too large to rely on the enthusiasts for growth. True, vendors like Dell, Gateway, and Micron that do better in that segment will have things easier, but even those vendors have some exposure. If you break down the growth by market segment, there's another fact that also troubles me greatly. Source: Projected Market Monitor The fact that troubles me is that for the first time since we've been keeping the index, all three segments have turned down. This is not normal. Even in the last half of 1996 when corporate buying evaporated, the small and medium business buyers were going to town and made up for the shortfall to a large extent. That's not true this time. All the sectors are down, and small business is plunging off a cliff. So is this all doom and gloom? Well, it looks to me that for the most part, Q1 is going to be a sorry quarter for US Workplace PC sales. This could even carry on into April or May. However, there is a mechanism that we find in other research which shows that once PCs reach a certain level of "obsolescence", there is a rush to replace them. In fact, I believe that we are looking at latent demand being built for sometime in Q2 or possibly Q3. A surge in sales sometime between May and August would certainly be expected.