By
and
Staff Writers, CNET News.com
.. news analysis Intel's warning yesterday of a sales slowdown could be a sign
that the PC market is hitting a wall.
Although PC sales are expected to increase by double digits again this year,
many analysts say, the concern is over the rate of that growth. Since 1995, PC
shipments have grown between 15 percent and 20 percent per year, according to a
recent report from Morgan Stanley Dean Witter.
.. The question is whether the PC market, which has thundered ahead regardless of
what was happening in the rest of the world, will start to dip below its
historical percentages because of shifts in the global economy, different
customer buying patterns and other changes. Intel is universally viewed as a
key barometer for entire industries ranging from hardware to software because
its chips are used in the overwhelming majority of desktop computers.
.. The chipmaker is saying that just one issue--sluggish sales in Europe--will
cause it to miss expectations for the third quarter. Some analysts believe that
the root of the problem could be much deeper, however.
.. "We've been hearing from Taiwan that there has been a slowdown in motherboard
shipments for like a month now," said Linley Gwennap, an analyst with The
Linley Group. "I have a hard time believing it's all a problem with Europe...If
Intel looks around, they're probably going to find some softness other places."
Roger Kay, an analyst at International Data Corp., agreed. "Something in the
cards says it has got to be more than Western Europe," he said.
.. Analysts had held out hope that this year's sales could again reach historical
norms, but they have grown increasingly pessimistic because of various factors.
In particular, they are concerned about numbers in their most important
regions.
Demand this year, for example, has been fueled largely by sales in Asia and
Latin America, not the core markets of Europe and the United States. Latin
America and Asia will see 30 percent annual growth, said Charles Smulders, an
analyst at Dataquest. By contrast, North American sales will grow only by 13.1
percent, while Europe will see growth of 8.4 percent.
.. "For major accounts, we believe that markets in the U.S. and Europe are
saturated. There is a PC for every person who needs one," Smulders said. "We
think that is having a big effect."
The European PC market actually has two sectors, one stalled and the other
growing, Fujitsu Siemens Computers said today, according to the Reuters press
agency. The mammoth computer maker said it does not expect the European
corporate computer market to strengthen in the final quarter of this year, but
added that the consumer market is growing strongly, according to the report.
.. The consumer market "seems to be going from strength to strength," Fujitsu
Siemens' director of corporate relations, Judith Grindal, told Reuters. "In
August alone we are looking at around 50 percent growth year-on-year."
.. In its warning, Intel said sales will grow by only 3 to 5 percent over the
second quarter, lower than the 12 percent seasonal jump many analysts had
expected. Before yesterday's announcement, other analysts noted that demand
forecasts depended on strong sales in September, particularly the last two
weeks of the month. the last
"Demand hardly ever looks good exiting the summer and usually improves as
September goes on," said Dan Niles, an analyst with Lehman Brothers. Typically,
45 to 50 percent of PC sales in the third quarter come in September, according
to Niles.
.. Although Niles indicated that PC demand appears on track, he said in an
interview a few hours before Intel's warning that European sales looked weak.
"We're not out of the woods yet," he added.
This is not to say, of course, that the PC industry is facing a complete
reversal. "When you look over the course of the year, we're (still) going to
see double-digit growth," Gwennap said. "It's way too early to decide the
fourth quarter is going to be a disaster."
.. Smulders said PC shipments worldwide will grow 17.4 percent. Estimates from
other analysts before Intel's warning fell generally in the range of 15 to 17
percent. If the reasons behind Intel's forecast are traced beyond Europe, those
numbers could be in jeopardy, however.
.. Not everyone is willing to bet that it is the beginning of the end. The PC
industry has escaped predictions of doom for years, often saved by some new or
unforeseen factors.
.. In the mid-'90s, the growth of the Internet led to resurgent sales. In 1997,
PCs sales soared as prices dropped below the $1,000 barrier. Last year, $400
rebates from Internet service providers spurred unusually strong sales early in
the year.
The growth of e-commerce and the Internet also has led to an explosion in
demand for servers based on PC technology as well as for storage systems, which
has fattened the profit margins of manufacturers like Dell Computer and
Hewlett-Packard.