Consumer demand for PCs remains strong and corporate spending is holding up which should result in an overall industry growth rate of between 16% and 18% for the March quarter, says Credit Suisse First Boston. US and European demand is strong and Asia is rebounding says the bank.
CSFB expects 1999 to reflect a 14.5% PC growth over 1998, but taking into account the declining average sale price, the PC market’s value should realize a gain of 10%. The biggest resellers, Ingram Micro, TechData and CHS are growing about 20%, CSFB estimates. For all of the hullabaloo over its first quarter numbers, Compaq Computer Corp’s PC business remains strong and should grow by over 20% compared with the year before period, including DEC’s contribution. Despite the expected earnings shortfall Compaq’s $9.4bn estimated revenue is still up 6% year over year, and up from 2% in the previous quarterly comparison. Its problem, CSFB thinks, is that its guidance for the quarter was simply too optimistic. It is also facing strong competition from new entrants such as Emachines, expected to ship between 250,000 and 300,000 low-cost PCs this quarter, catapulting it into fourth place among the PC suppliers from nowhere a few months ago. Gateway is coming on strongly too. CSFB expects its unit ships to be up 35% on revenue up 21% in the quarter, while Dell should exceed its 28% growth consensus and ship 55% more units than a year ago.
IBM’s PC business should be up between 17% and 20% on last year, giving it 2% in overall market share; 10% of its PCs now go direct; and IBM’s PC Co is expected to be profitable again this quarter. It achieved break even in the third quarter of 1998 and recorded a profit in the fourth quarter. CSFB notes the five leading PC suppliers now account for 40% of the worldwide PC market. Collectively they’ll have shipped 27% more units this quarter, up from 25% growth in the previous comparison period.
On the software side CSFB expects the Windows 2000 Beta 3 to ship at the end of April and believes Microsoft Corp has a target of Comdex Fall to introduce production ships. Office200 ships in June.
