PC companies expect little Christmas cheer

Less Santa, more Scrooge
Written by John G. Spooner, Contributor

Less Santa, more Scrooge

While reporting their third-quarter earnings, the major PC companies have been shedding some light on how the all-important fourth quarter will shape up - and the outlook is bleak. A series of recent financial reports has reinforced expectations of a low-key Christmas season, typically the most robust period of the year. Although the reasons vary - the weak economy, lack of compelling need to upgrade and fears of war - the bottom line is that there may be little to cheer about. Consider these tidings: " Apple Computer said sales are likely to be roughly flat with last quarter's. "Looking forward, we do not expect our industry to pick up anytime soon," Apple chief executive Steve Jobs said in a statement accompanying Apple's earnings. " Chipmaker Intel said fourth-quarter revenue would be flat to up by six per cent. " AMD said its sales are likely to grow in the fourth quarter, but that's due in part to the larger-than-expected slide in the third quarter. " IBM expects earnings to grow at about 12 per cent from the third quarter to the fourth, compared with a historical rate of 12 per cent to 18 per cent. " Motorola, which makes products used in wireless and other electronic devices, cut its earnings outlook for the fourth quarter to 10 cents per share from 14 cents. It blamed slowing demand in several of its businesses, including broadband, infrastructure and semiconductors. " Gateway chief financial officer Rod Sherwood said the company expects sales to grow "some" in the fourth quarter compared with the third quarter because of gains in market share and some seasonal improvement from holiday shopping. Overall, sales in the fourth quarter are likely to climb seven per cent to 11 per cent compared with the third quarter, said Todd Kort, an analyst with research firm Gartner. Over the past five years, the growth rate has been closer to 16 per cent. PC sales peaked in 2000, with about 133 million desktops, notebooks and Intel-based servers sold, according to research firm Gartner. In 2001, sales slipped about 4.6 per cent, and forecasts call for a flat year in 2002. NPD Techworld analyst Steve Baker said in an interview last week: "Going into Christmas this year, nobody has any expectations. The best expectations are that (it) will look like last year. The worst case is that (sales) will be significantly lower. The reality is that it's likely to be somewhere in the middle." PC companies also have not come up with a compelling reason for consumers to upgrade, according to Toni Duboise, an analyst at market research firm ARS. Microsoft this year will release the portable Tablet PC and its Media Center PC, which puts the PC at the centre of the living room. But neither will account for significant sales this year. Duboise said: "We don't have the big draw. There is nothing to excite a consumer onslaught. A continued DVD interest may be an indicator that Sony will fare well with its DVD-clad product line. But, as they say, the proof is in the pudding... I still do not see a compelling new toy to entice the mainstream IT market." Additionally, buyers are becoming more budget conscious. Intel stated that consumers have shifted toward more budget processors for the past two quarters. The news, however, is not universally bleak. Dell and Sony continue to do well despite the soft conditions. And consumers with extra cash can land some decent machines at good prices. Dell regained designation as the world's leading PC maker during the third quarter. It lost the distinction to the combined HP-Compaq in the second quarter. Sony has grown rapidly in the consumer market and recently released a series of machines with DVD recorders and software to ease the recording process. John G. Spooner writes for News.com. Michael Kanellos of News.com contributed to this report
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