Attacks likely to dent PC market

Summary:The PC industry is bracing for even worse times in the wake of terrorist attacks on America.

The PC industry is bracing for even worse times in the wake of terrorist attacks on America.

Although many economists and analysts expect a recession to follow the bombing, companies heavily involved in the PC business could experience more pain than other sectors.

Part of the reason lies in what could be called the September effect, the unusually high percentage of sales that typically occur in the last two weeks of the month. Although most quarters are "back-end loaded" in terms of sales, the third quarter is especially lopsided because of back-to-school sales and sales in Europe.

"The last month represents anywhere from 50 to 70 percent of the shipments," US Bancorp Piper Jaffray analyst Ashok Kumar said. "The earliest we will see any recovery will be the second half of 2002."

Two weeks ago, Intel CFO Andy Bryant said PC demand appeared to be stabilizing. Still, he warned that unexpected events in September could lead to order cancellations and declines in sales.

"September is still crucial for the quarter," he said. "There is still risk in there, but to tell you the truth, with the sales that we saw in July and August, we are as comfortable as we could be.

"Of all the quarters, it is the quarter where the last month makes the quarter," Bryant added.

The changed circumstances, however, make that goal unlikely. Fewer PCs will be shipped this quarter than in the second quarter or in last year's third quarter, predicted IDC analyst Roger Kay.

"I think it is going to be down in" the third quarter, Kay said. "There was a lot riding on this month."

A sales surge in September was taken as an article of faith by many in the industry, until last year. Then, the PC market was roiled after Intel, Gateway, Apple and others said the end-of-the-quarter surge wouldn't occur.

Before the announcements in 2000, most analysts expected the PC sales to pick up in the third and fourth quarters. Instead, PC sales and PC-related revenue has slid since then.

Although few expected a rebound to the good old days of 1999, many executives said the market would begin to return to its normal pattern of increasing sales in the second half. The release of Windows XP on Oct. 25 was expected to help perk up the consumer market, according to a number of analysts and executives.

Corporate sales, meanwhile, were expected to enter a major upgrade cycle.

"You had an incredible peak of buying in the second quarter of 1999. I think next year you'll get some kind of a snap-back, modulated on what happens with the economy," Michael Dell, CEO of Dell Computer, said at the Lehman Brothers conference the day before the disaster. "This year, spending by government, particularly U.S. government, is quite healthy, while last year it was not."

The disaster, though, will likely cause corporations and consumers to rethink spending plans drastically. On Monday, many investment bankers said the world should brace for a recession.

Overseas, the Market Intelligence Center, a government-sponsored analyst firm in Taiwan, said hardware exports from the island would decrease from $42 billion to $39 billion because of the attack.

Topics: PCs, Dell, Hardware, Intel

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