There may be signs that the PC market is about to slow in the third quarter. If that's the case, those financial results from everyone from Intel to hard drive makers and other component players may be about as good as they are going to get.
The worries were flagged by Susquehanna Financial analyst Chris Caso, who downgraded Intel to a neutral on "a weakened environment looking into the third quarter."
Caso makes a few points in his research note:
- PC makers hiked prices in Europe since the Euro has fallen dramatically relative to the U.S. dollar. PC costs are in dollars.
- Asia notebook build forecasts are projecting 10 percent growth and flat to low-digit growth for motherboards. Ditto for hard drives. Add it up and Caso says "if these forecasts hold, it would result in well below seasonal 3Q growth and the worst 3Q for notebooks since 2001."
- Strong second quarter data points for the PC market were due to back-to-school inventory builds and a rush ahead of currency fluctuations in Europe.
- The hit from a European slowdown, an emerging worry, won't be known until the end of summer, says Caso.
There are some key nuances to note about Caso's call, which appears to be downbeat relative to what vendors are currently projecting. He maintains that enterprise demand is continuing to improve and Intel's Core processor lineup is a driver for the business. Simply put, he's just not ready to pay up for Intel shares given the worries.
Related: Will Europe cast shadow over IT spending?