Conference nyoss1::market_investing

888.0. "PC Stock Outlook" by CAPNET::ROSCH () Thu Jul 13 1995 09:54

    (c) 1995 Copyright the News & Observer Publishing Co.
    
    (c) 1995 Bloomberg
    
    SANTA CLARA, Calif. (Jul 12, 1995 - 21:18 EDT) -- Personal computer
    makers will be in fierce competition to sell machines in the fourth 
    quarter that likely will escalate into a price war, a leading market 
    research firm said.
    
    In expectation of huge demand, most computer makers are building large
    quantities of machines, and the most important factors for buyers will 
    be price and features, said Martin Reynolds, a director at market research 
    firm Dataquest Inc.
    
    "IBM, Compaq, Hewlett-Packard and Packard Bell will all be there and
    somebody has to lose," Reynolds said in a presentation at the Dataquest 
    PC conference in Santa Clara, California. "It will be very, very 
    interesting to see what happens in the fourth quarter."
    
    If those manufacturers are unable to sell their machines in the holiday
    season, they will be forced to slash prices to move out the inventory, 
    he said. "They will try to unload... before it becomes useless," Reynolds 
    said.
    
    The advent of Microsoft Corp.'s Windows 95 operating system, scheduled
    to be launched on Aug. 24, coupled with increasing demand for PCs in the 
    home market and abroad has spurred huge expectations for fourth-quarter 
    sales.
    
    One important differentiation for manufacturers will be price points as
    well as splashy features. Compaq Computer Corp. recently announced a 
    new personal computer for the consumer market featuring splashy video 
    capability based on a standard known as MPEG. Reynolds said this will
    be very important in attracting buyers.
    
    "In the stores, all the PCs will be playing 'Top Gun,"' he said.
    "Compaq is making all the right moves."
    
    Reynolds said he expects other new product announcements from the other
    PC makers that include similar features.
    
    'Christmas '95 Trap'
    
    Reynolds has dubbed this situation the "Christmas '95 Trap" because of
    past mishaps that have been make-or-break for personal computer makers.
    
    In 1993, International Business Machines Corp. shipped too many
    personal computers in the fourth quarter and was forced to take back 
    nearly $600 million in inventory from angry retailers.
    
    Then, last year Big Blue underestimated demand, selling out of its
    just-announced Aptiva computer in October and losing an estimated 
    $100 million in sales.
    
    Compaq, on the other hand, had more than $2 billion in inventory going
    into the fourth quarter of last year, and was able to take advantage of 
    IBM's misfortune.
    
    Houston-based Compaq unseated IBM as the No. 1 PC maker in the world
    for the first time last year. Compaq is likely to retain that title, 
    Dataquest's Philippe de Marcillac said.
    
    "Compaq clearly is well-established," de Marcillac said. "I think it is
    unlikely that Compaq will be overtaken on a worldwide basis."
    
    The only weakness Compaq shows in the portable market, where Toshiba
    Corp. is the market leader. Also, the entrance of Hewlett-Packard Co. 
    into the desktop market likely will affect all the top manufacturers, 
    especially in the corporate market, de Marcillac said.
    
    "H-P is the one to watch," he said, adding that Hewlett-Packard could
    rise to become the fifth-largest PC maker in the next few years from 
    No. 9 last year.