PC Sales Up But Companies Not Buying

"The December quarter showed some upside surprise on the consumer side, however the more important corporate side remained weak and really failed to show any signs of improvement," Fortuna said during a conference call. "We believe corporate will remain weak for the first half of '02."

Fortuna says fourth-quarter worldwide unit sales for PCs rose about 8 percent from the third quarter but are expected to suffer a sequential fall of 8 percent to 9 percent in the first quarter. PC sales are typically strongest in the fourth quarter because of the holiday season.

Given the stronger consumer sales, Fortuna says Dell Computer, Gateway and Compaq Computer could post better than expected revenue for the fourth quarter. Compaq and Gateway may have had better per-share results than anticipated, he says.

According to research group Thomson Financial/First Call, analysts see Dell posting earnings of 16 cents per share on revenue of $7.6 billion. Compaq is seen losing 3 cents pershare on revenue of $7.6 billion. Gateway is expected to lose 1 cent per share on revenue of $1.4 billion.

Several PC companies said that they had strong sales during the Thanksgiving weekend.

But a stronger fourth quarter isn't a given. In 2002, fourth quarter demand failed to materialize, pushing the PC industry into a slump that worsened as Dell pushed an aggressive price war on less nimble competitors, bumping Compaq for the No. 1 PC maker spot.

Analysts, including Bear Stearns analyst Andrew Neff, says sales dropped off the weak after Thanksgiving but have since recovered.

Neff says sales picked up during the two weeks leading into Dec. 25 and, given low expectations for the quarter, were better than expected. He's less positive about the first half of 2002, typically the slowest quarters for PC sales.

One of the biggest issues for 2002 is demand for enterprise computing, including PC demand, Neff wrote on Friday in a research note. The industry needs more than just one important new application, or "killer app," to increase demand, he says.

"The key issue is whether there are multiple drivers for demand--the industry is too large to depend on one 'killer app'--as we need to see several factors moving in tandem, the largest of which is the global economy," he wrote.

Wall Street analysts who cover microprocessor maker Intel, such as JP Morgan, have also said in recent days that demand from PC makers, including for Intel's Pentium 4 microprocessor, was strong in the fourth quarter.

Speculation about the timing of a recovery has pushed semiconductor stocks, and some PC stocks, higher this week. Since Dec. 31, Dell shares have gained 9 percent on Nasdaq and were up 2 percent on Friday at $29.76.

Compaq shares, up 14 percent since Monday on the New York Stock Exchange, gained 2 percent to $11.20 on Friday. Gateway shares are up 17 percent since Monday and were up 2 percent at $9.43 per share, also on the New York Stock Exchange.

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