Ten O'Clock Tech: Hoping For A PC Sales Surge
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Ten O'Clock Tech: Hoping For A PC Sales Surge

Arik Hesseldahl,, 07.03.01, 10:00 AM ET

NEW YORK - Among the companies involved in the PC market, there's a major marketing offensive brewing designed to get you to buy a new personal computer before the year is up.

You can see it starting to happen, with the latest PC processor chip unveiled by semiconductor giant Intel (nasdaq: INTC - news - people). While the speed bumps it announced to its Pentium 4 processor and Celeron line of chips resembled many previous speed-bump announcements, as is often the case with Intel's spin, you ain't seen nothing yet.

Yesterday it kicked up the top clock speeds of its Pentium 4 chip to 1.8 gigahertz, but also said that it will soon boost the top speed to 2 GHz before the end of the year. These speed upgrades are becoming increasingly routine matters. The last one, which took the Pentium 4 to 1.7 GHz, happened on April 23. This time PC makers like Gateway (nyse: GTW - news - people) and Dell Computer (nasdaq: DELL - news - people), which often try to make their own marketing push when a new chip launches, were unusually quiet.

Everyone connected to the PC industry must be trying to rest up until after the summer. There are high hopes for September and October. That's when students heading back to school may buy lots of personal computers, which would restore some health to the balance sheets of both PC manufacturers and chip companies. October also brings the official release of Microsoft's (nasdaq: MSFT - news - people) Windows XP operating system. Strong PC sales in the fall quarter could lead to even better sales in the holiday season.

The PC industry could use some good news. Intel, along with the rest of the semiconductors industry, is weathering the worst year in memory. Yesterday, the Semiconductors Industry Association grimly announced that chip sales declined even further in May, to $12.7 billion from $13.7 the month before, and $15.9 billion in May of 2000. Meanwhile, analysts have been cutting their ratings on stock in PC makers like Gateway and Compaq (nyse: CPQ - news - people).

But hopes aside, any sales gains that do materialize will probably be modest. Most people who have bought a computer in the last three years aren't ready to upgrade yet, especially in the uncertain economic environment. No matter who you are, a PC is a major purchase that can probably be put off for several months. That's true for big companies too.

Only a truly compelling new capability will make buyers open their wallets enough to turn the industry around. The Internet got people excited in 1998 and 1999, and that coincided with a cycle of unusually low PC prices at the same time. This spurred sales volumes that won't likely be seen again for some time--no matter how the chip inside the computer is marketed.