Worries about PC sales snowball; Intel downgraded

Worries about PC sales snowball; Intel downgraded

Summary: Another analyst has hopped off the Intel bandwagon, this time over concerns about waning PC sales.In a research note on Friday, J.

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Another analyst has hopped off the Intel bandwagon, this time over concerns about waning PC sales.

In a research note on Friday, J.P. Morgan analyst Christopher Danely downgraded Intel from "overweight" to "neutral." Intel, along with AMD and other chip makers, was downgraded on Wednesday over the same concern. The big fear: An economic slowdown is crimping PC sales. Danely slightly lowered his earnings and revenue targets for Intel.

Simply put, analysts expect semiconductor companies to be stuck with a glut that pinches profits. On the bright side, chip makers will have to cut prices to clear out inventory and that benefits buyers. So-called "inventory corrections" can work out nicely if you're in the market for a PC--assuming computer makers pass on cost decreases.

Here's what Danely had to say:

Our checks indicate Intel experienced a late-quarter slowdown in order rates from the PC end market which negated the upside we believed Intel experienced earlier in the fourth quarter.

Danely goes on to cite that "negative PC data points (are) piling up."

We believe the weakness in order rates could be coming from Europe, as both Acer (fourth largest PC OEM) and European electronics retailer DSG recently lowered estimates due to lower than expected order rates from Europe.  We would note Europe represented roughly 23% of overall PC demand during 3Q07.

Indeed, DSG cut its outlook on Thursday and outlined a few worrisome points as same store sales fell across the board. Sir John Collins, group chairman of DSG, said in a statement:

Sales in UK Computing were very disappointing with lower demand for laptops in the pre Christmas gifting period, but good demand for games consoles and digital photo frames. Driven by promotions, sales of laptops improved in the post Christmas period.

The evidence of a technology slowdown in the U.S. is more mixed, but that will be clarified once earnings reports start in earnest in a few days. In any case, tech giants are likely to get dinged if Europe demand slows. Perhaps Asia can pick up the slack, but that region's demand would have to spike to offset a slowing U.S. and European economies.

Topics: Intel, Enterprise Software, Hardware

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18 comments
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  • Idiots

    To show how much deep thought goes into these announcements, they downgraded not only Intel but every other semiconductor manufacturer, including those who make embedded silicon for things like cellphones -- and who are actually seeing increased sales and revenue.

    All it takes is to be in the "semiconductor" sector, and your stock is tied to Intel's. For years I had to laugh when any announcement that AMD had increased its market share resulted in an immediate drop in its stock price, because an increase in AMD share meant a decrease in Intel share, which meant that "semiconductors" were down, which dropped AMD share prices.

    Morons.
    Yagotta B. Kidding
  • CEO's are deciding that upgrading...

    to today's new technology is a lateral move at best with no help to the bottom line. I personally haven't bought a new PC, OS or App in the last four years (since Windows 2000) that has made one aspect of my business more efficient (exclusive of VPN technology I've been implementing.)

    I have a 4yr. old AD Domain server that I replaced the HD and PSU (it all still worked, just did it to be safe) this year. I expect it to last another 4yrs. The surprise... it manages my domain as well today as it did 4 yrs. ago and will continue to do so 4yrs. from now.

    My Office 2000 apps are just as efficient today as they were when I bought them. Office 2003 didn't do one thing for my efficiency and will now cost me $$$$ because of MS's last update. Open office will be replacing all Office 2003 apps in my organization.

    Bottom line... I won't be spending along with the rest of the businesses that have wised up. Plus, as soon as Intuit gives me a Linux version of Quickbooks or I switch to Open Accounting, Microsoft will be a thing of the past in my org.
    bjbrock
    • Common story

      [i]today's new technology is a lateral move at best with no help to the bottom line.[/i]

      Exactly what I'm hearing. What's the point of a hardware/OS/software change if it's just a slightly faster version what you're using now? My business users complain about a lot of time and expense for not much of a win. I don't have a dual core anything on my network and get my work done (though I do have some fire breathing video cards).

      Part of what's causing the PC market to sag is simple market saturation. Most people who want one already have a PC and two or three year old technology is pretty good. Certainly fast enough the vast majority of users. Sub $200 notebooks and $200 web PC's are gutting what's left of the low end of the market even turning in anemic but adequate performance.

      Combine that with the "no value" upgrade and a soft economy and it's not much of a surprise PC sales are going to fall.

      So many companies have lost sight of value from the perspective of their customers.

      [i]that I replaced the HD and PSU[/i]

      First read I thought you were saying you replaced AD with HD and I was beating my brain trying to figure out what kind of domain controller HD was. Too funy. Slow down, look at the words. :)
      Chad_z
    • I agree with much of what you said

      In terms of hardware. I found that our 2.X P4 systems ran Office 2003 just fine, and have no problems with Office 2007 on these sysetms, so eventual upgrades to 2007 will work out just fine on what we have.

      One server is 5 years old, 2 CPU's and 4 gig of RAM, and is running Sever2003 (AD) without a hitch, the other is 3 years old and should work well for quite some time to come.

      Though we upgrade our software to suit our needs, it's nice to know that we do not need to rush out and upgrade our hardware to realize those needs, the lastest round of hardware is more then adequate.
      GuidingLight
  • RE: Worries about PC sales snowball; Intel downgraded

    Interesting, and yet, Apple sales just keep rolling along, growing each quarter, and gaining inroads. Maybe its because there is no compelling reason; the fact that no one ends up winning in a cut throat war based on price rather than 'what the computer can do'.
    Kaiwai
  • Might as well face it, we've got a Recession on our hands

    The price of energy has tripled in the last 7 years. The result of such an event is always the same - economic slow down, unemployment and under-employment, cessation of investment in durable goods (you don't need to buy new computers since you just laid off half your staff). IT is always considered a "cost center" and must be cut first. Less computers sold means less CPUs sold.

    While the equation "high oil prices = lower CPU sales" isn't exactly obvious, it probably will be true in 2008.

    Why are energy prices up so much? Well, it's a complex situation with massive profits by some parties along the chain, and a on-going war in the mid-east isn't helping a bit. Watch for $4+ per gallon gasoline in the spring (refiners in the US usually shut down plants in the spring for "maintenance") which will simply add insult to injury of the US economy.
    WiredGuy
    • Recessions LOWER oil prices!

      Uh, think this through before posting. Oil is high because the worldwide economy is VERY strong. U.S. GNP was up 4.9% in Q3. That is NOT a recession. China is growing rapidly, demanding more fuel. The U.S. is restricting exploration, producing less. Yes, the MEast has problems, but output is up worldwide. Demand is just outstripping supply, pushing prices are up. Not complex at all. IF we get a recession (no, it is NOT a certainty), then oil prices will decline, not go up, because demand falls during economic slowdowns.

      PC sales are down because there is no BIG new thing you can do with the latest models (for most of the market) that requires an upgrade. Teach the PC to do something NEW that we all want done and you will push up PC sales. Vista is NOT a must have, and AMD and INTEL's new chips aren't YET necessary for what I am doing on the Internet right now.
      rjacobs@...
  • Gee, I wished you were right

    "Uh, think this through before posting. Oil is high because the worldwide economy is VERY strong. U.S. GNP was up 4.9% in Q3. That is NOT a recession."

    Oil prices are not exactly controlled by market forces. The number of producers are small and none of them want to see lower prices and since they all benefit from a higher price, there virtually no competition, so there is no force to push it back down. Have you not heard the old saying in the oil patch? - the price of oil goes up like a rocket and comes down like a feather.

    BTW, the published GNP is calculated in such a strange way as to be of little use for forecasting. The increase in energy prices actually boosts the GNP number, as does domestic inflation. Most of the Q3 4.9% (annual rate) growth can traced to inflation and spiraling energy costs alone. GDP is somewhat more accurate, but isn't much more useful for predicting future performance of any given industry or corporation.

    The fact remains that most experts are forecasting lower worldwide consumption of CPUs specifically, and electronic in general. It is simply an extrapolation of an existing trend.

    Just in case you're curious, our government usually doesn't detect a recession until 6 months after it has begun. In the end, the stock market reflects (at least to some degree) where things are headed. If you are an investor, you know that the DOW (agreed that it is not a perfect refection of the market as a whole) is up 15% since George W Bush took office almost 7 years ago...a far cry from the common thought of an average of 15% per year growth. I'm not saying that the current President has any direct effect on the market, just that in this political season, such we tend to fit things into tidy economic "periods". The DOW was up about 7000 points during the Clinton administration, for comparison (I never voted for him though).
    WiredGuy
    • Glad you are not right

      Wrong. The oil cartel cannot raise prices in a weak market. Nor were they able to do so - only 3-4 years ago oil was $15 a barrel in a weak world economy. The number of producers are NOT small, as even OPEC controls less than 1/2 of the oil produced, even if we assume no overproduction by cartel members. Of course there is competition, why do you think margins (in the absence of skyrocketing prices) for the Oil companies are so low? Besides, you could just as well argue that the price of oil is only an indicator of dollar weakness, not the lack of competition.

      That figure was GDP up 4.9%, not GNP (old habit) and although historical figures have little predictive value, they certainly tell us that there was strong growth and no recession through the third quarter. And no, it was not due to "spiraling energy costs and inflation" - it was due to lots of jobs, high productivity and high employment levels. Check the facts.

      And yes, fewer CPU's are being sold because the most likely buyer of a new computer is someone who already has one, and you
      and I are both probably getting what we want from our current hardware.

      Uh, NOBODY says the market will increase an average of 15% per year. No idea where you dreamed that one up. If you had said an average of half that, I would let it go, but 15% is a number out of your own hat. The Dow is a measure of investor returns and profitability, not a measure of the economy, although the two are closely related.

      Yes, the DOW was up 7K points during the Clinton Admin. but it did not begin its run until the Democrats were turned out of Congress in '04. From the end of the recession, under the Bush Admin., the Dow is up 6K points, so what is your point? Look at the chart instead of throwing numbers around.

      In any case, I am right: Economic growth increases demand on energy (all kinds) and recession reduces demand. Oil prices fell during the recession at the end of Clinton's admin. and began to rise just as the economy recovered in 2003, compounded by the uncertainty of the Iraq war. You also did not dispute the strong world economy or even the strong U.S. economy.

      When I need a new PC, it will be because the bloatware from MS and other computer makers has so significantly slowed my current PC that I can't stand the wait. Until then, or unless some new software is developed which is a MUST HAVE, I will continue until the WinTel monopoly forces me to update.
      rjacobs@...
      • I've made 400% on my oil stocks....

        but I doubt that pays for the extra fees at the pump ... happy or sad??? ... I just got a less-guzzeling car so... maybe I can be happy?
        nomoremicrosoft
  • Misleading setence

    "In a research note on Friday, J.P. Morgan analyst Christopher Danely downgraded Intel from ???overweight??? to ???neutral.??? Intel, along with AMD and other chip makers, was downgraded on Wednesday over the same concern."

    No, AMD was not downgraded to neutral, it was down graded to SELL. As in dump the stock as fast as you can. That is a very BIG difference.
    No_Ax_to_Grind
    • Misleading...as in No_Axe advise?

      Please...get off the pot of deliver it!
      nomoremicrosoft
  • Could It Be No One Wants Vista??

    Hmm...
    itanalyst
    • Over 100 Million have voted NO with their dollars! (NT)

      NT
      nomoremicrosoft
  • Good enough, people have what they want

    and the treadmill of constant buy and upgrade is slowing. Could it be no one wants to expend money on a new box when what they have is running what they want right now or have been running for years and years. The gaming elite are the few who upgrade or buy new outright on a bleeding edge cycle. Businesses are seeing that computers over the last few years offer them years of operation and most, they need to replace a card here or refresh an OS there. If anything, ppl will switch to something different, not the same boxes, maybe a Xp to leopard, but what do the current crop of boxes over that the ones from a few years back don't for the processing that people do with the software requirements around yesterday and today. Who's running the intensive cure for disease programs or the govt spy program to filter data, you're think tanks or on the opposite end it analysts maybe.
    Boot_Agnostic
    • This is a reasonable response...

      And I agree for the most part. I am one of those die-hard's that upgraded any time something considerably more powerful came around. Hell, I used to build a new machine every 6 months and retire the old one for a special purpose, such as a server.

      Most of that was to keep up with gaming.

      You know what? I'm tired of it. I'm tired of $500 video cards. Ever pricer motherboards. Etc... I'm getting too old for this crap :)

      After years of saying I'd never buy a console, I finally bought an XBox Elite. You know what? It's just dandy for gaming, and the silly thing takes care of ITSELF!

      And there's something to be said for kicking back on the couch, beer in hand, playing online games without worry (assuming EA's servers are working, which they rarely seem to be these days), instead of sitting upright at the same computer I work on 12 hours a day.

      It's just nice to get away from every now and then.
      BitTwiddler
  • RE: Worries about PC sales snowball; Intel downgraded

    More and more, when I click on headlines on the ZDNet home page, I am taken to something other than what I want. In this case, I click on the link for Apple subnotebook expectations and came here instead. Just sayin' ...
    vince@...
    • Correct link

      I agree that broken links are annoying, and definitely more common on zdnet than any other site I frequent. I went to the blog page and found the right link: http://blogs.zdnet.com/Apple/?p=1150
      enduser_z