Expectations for Tough Computer Hardware Environment as ASPs Head Lower in Both Corporate and Consumer Markets

The technology sector is bracing for a challenging environment, with BancBoston Robertson Stephens downgrading several major computer hardware companies. Amid concerns about the Year 2000 (Y2K) lockdowns and a shift towards lower-cost PCs, the firm's senior hardware analyst Daniel T. Niles has reduced his ratings for Intel, Hewlett Packard, Micron Electronics, and Compaq Computer. Niles expects PC revenue growth to slow due to a combination of factors, including the increasing penetration of sub-$500 PCs, Celeron's rise in the corporate market, and the impending Y2K lockdowns by large corporations in the middle of the year.

Key Takeaways:

• BancBoston Robertson Stephens has downgraded Intel, Hewlett Packard, Micron Electronics, and Compaq Computer due to a challenging market environment.
• Niles expects PC revenue growth to slow to 3 percent, down from the firm's previous estimate of 6 percent and compared to 2 percent in 1998.
• Four key factors are expected to negatively impact the market: the rise of sub-$500 PCs, Celeron penetration in the corporate segment, Y2K lockdowns, and summer seasonality.
• BancBoston Robertson Stephens remains optimistic about the industry's potential, citing low channel inventories, a recovery in Asia, increased Y2K spending by smaller corporations, and growing broadband deployment.

Statistics:

• PC revenue growth is expected to slow to 3 percent.
• The firm's previous estimate for PC revenue growth was 6 percent.
• PC revenue growth in 1998 was 2 percent.
• BancBoston Robertson Stephens' research team covers more than 600 companies and has 55 equity and high-yield research analysts.
• The Y2K lockdowns by large corporations are expected to occur by mid-year.

Sources:

• BancBoston Robertson Stephens (CRD number 41271)
• PRNewswire (April 12)