Tech Sector Sees Signs of Recovery

Strategic Insights -

The personal computer industry is showing signs of a recovery, with key players such as IBM, Intel, and Apple releasing strong quarterly results, and Dell expected to follow suit. This unexpected positive news comes after a spate of disappointing second-quarter earnings and worries about rising inventories in the sector. Analysts are cautiously optimistic, noting that the recovery is holding steady for now, despite some isolated company problems.

Key Takeaways:

  • Dell expected to earn 31 cents a share for the quarter ending July 30, 2 cents above both its previous forecast and the consensus of analysts.
  • The company's second-quarter revenue is expected to be $11.7 billion, in line with its previous guidance.
  • Personal computer shipments grew 14 to 15 percent in the second quarter of 2004, compared with the same period last year, according to IDC.
  • Dell's personal computer shipments grew 23 percent during the same period.
  • The commercial sector, which includes businesses, governments, and schools, is driving the PC recovery, with significant demand coming from small, medium, and large business segments.
  • Analysts attribute the upgrade cycle to both the business and home market, with good underlying economic rationale for the upgrades.
  • Intel saw profits nearly double in the second quarter, but attributed the inventory surplus to delays in reducing production levels.

Statistics:

  • Dell's expected second-quarter earnings per share: 31 cents
  • Dell's previous forecast and the consensus of analysts: 29 cents
  • Dell's second-quarter revenue: $11.7 billion
  • Growth in personal computer shipments in the second quarter of 2004: 14-15%
  • Dell's personal computer shipments growth: 23%
  • Apple's Macintosh computer sales growth: 19%
  • Intel's profits increase in the second quarter: nearly doubled
  • Dell's inventory levels: expected to be profit-boosting, not a negative factor

Sources:

  • "Dell Announces Earnings, Revenue Guidance," Thomson First Call, July 2004
  • "IDC Releases Quarterly Personal Computer Report," IDC, July 2004
  • "I.B.M. Posts Surprising Profit Gain," by Ian Austen, The New York Times, July 2004
  • "Apple’s Profit Triples, Led by iPod Sales," by Richard Niemiec, The New York Times, July 2004
  • "Intel Misestimated Demand, Chief Financial Officer Says," by Gregory Zuckerman, The Wall Street Journal, July 2004