Software Stan denies falling demand in PC market

Slowdown, what slowdown

Microsoft said yesterday worldwide demand for PCs remained strong, despite a seasonal lag in sales. The great software giant reassured Wall Street analysts that business was fine, after profit warnings from computer companies had raised concerns about the PC market, according to today’s Financial Times. After the close of trading yesterday, Greg Maffei, Microsoft CFO, made the following statement: "We’ve seen some pre-announcements, some rumours of pre-announcements, some speculation that the PC business is falling apart." But he went on to reassure analysts: "All evidence that we see suggests that is not true." Maffei said the post-Christmas slowdown was "just like every year," adding that sales were in line with expectations for the current third quarter – apart from the $400 million in lost revenue from the delay in shipping Office 2000. Maffei said projections for the current quarter were $4.2 billion. Speaking to The Register, analysts said the industry was suffering from a slowdown in growth of demand, but were divided on when this would pick up. Andy Brown, IDC research analyst for EMEA PC market, said there was a definite growth slowdown in worldwide PC sales, but this should pick up by the end of 1999. "Microsoft is trying to reassure the stock market. It is worried about share price and confidence," he said. Brown added that the regions showing the greatest slowdown, according to IDC research, were Eastern Europe and the Middle East. But he stressed that this was not a drastic turn of events. "There isn’t a massive slow in demand. Key drivers like year 2000, the euro, increasing IT spend in businesses, PII migration and the Internet will bolster sales in the second half of 1999." Clive Longbottom, CSL analyst, thought the situation would not pick up this year. He said: "We can currently see a slowdown in growth of demand, and there will be a slowdown of demand itself in the second half of the year. This will probably continue until around next March." Microsoft’s announcement came at a time when fellow computer companies were complaining of weaker than predicted sales. 3Com recently warned its second quarter revenue would fall short of forecasts. The number two networking vendor cited decreasing demand in the US and Latin America as one reason. At the time, Eric Benhamou, 3Com chairman and CEO, said he was unsure whether this decline in the US was a temporary blip or a more long-term trend. But he said he understood his rivals were experiencing a similar situation. This year has also seen Dell, Hewlett Packard and Compaq reporting weaker than expected sales. Yesterday, US distributor Ingram Micro warned its first quarter earnings would be below expectations. It blamed cautious buying trends in Europe, Latin America and Asia. ®

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