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Intel misjudgements to slow PC growth

Compaq set to make hay as world consumption changes

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A report from FHI Research has pointed to continuing growth in the PC market, which could have amounted to 25 per cent this year were it not for the fact that Intel has mismanaged capacity during the course of the year.

But the report also suggests that unforeseen factors mean that growth patterns will widely vary from region to region, while other changes mean that Compaq is set to be a prime beneficiary, as PC growth continues.

According to the document: "If Intel, AMD and Cyrix can meet demand and there are no significant shortages of key components, we can reasonably expect a banner year of 25 per cent unit growth in 2000... FHI Research does not believe that Intel has geared up sufficient capacity to handle any unit growth over 21 per cent for the year... and may have misjudged their product mix to produce too many low end Celerons, even as demand shifts to higher priced/higher performance processors."

The barrier to growth has also been compounded by other severe component shortages, particularly capacitors, the survey reports.

Despite the hype surrounding wireless devices, there is no evidence from the corporate market that businesses have any intention of moving away from x86 desktops and notebooks and adopting this technology, the report says.

Buyers investing in PCs are far less likely to use them just to function as set top boxes, but will instead push their machines to the limit by taking advantage of productivity gains they can make.

The commercial market for PCs accounts for around 75 per cent of PC purchases, says FHI Research, and there is no indication that this proportion is likely to change in any significant manner. Adoption of Microsoft Win2k will not start to occur until next year, due to the length of corporate buying cycles. However, adoption will occur rapidly once the change occurs.

Sharp growth in the Asian market during the second half of this year, is likely to catch the PC market by surprise, with build to order and direct distribution, such as the Dell model, likely to become displaced by the build to inventory model. This will be particularly true in Asia, Europe and Latin America, and Compaq will benefit from these changes in key market areas, the report suggests.

These changes mean that the current Compaq share price is unnaturally depressed, the authors of the report conclude. ®

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FHI Research

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