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Analyst Rankings: Computer Hardware Sector Outperforms Despite Slow Sales

Read what our analysts have to say about this broad sector.

This week, in our focus on the winning analysts in each industry category from our

Analyst Rankings -- Equity 2000

survey, we profile the top analysts in the computer hardware industry. (Check out our last focus,

telecommunications equipment.) Next week we'll look at the computer storage and peripherals sector.

While PC demand has been somewhat sluggish so far this year, the computer hardware sector has outperformed the

S&P 500

by 19%. This sector encompasses both enterprise and PC hardware, and each of our top-three analysts has a somewhat different focus and outlook on the group. Both Don Young of

PaineWebber

and Dan Niles of

Lehman Brothers

anticipate an increase in PC demand, noting the end of the Y2K purchasing slump and the prospect of

Windows 2000

boosting sales. But Young favors

Gateway

(GTW)

because of its direct contact with the customer and its ability to sell add-ons, thus increasing their margins, while Niles prefers

Compaq

(CPQ)

and

TST Recommends

Dell

(DELL) - Get Report

, both companies with larger corporate exposure.

Merrill Lynch's

Steve Milunovich focuses on enterprise hardware and storage and predicts robust growth in both areas. He believes

Sun Microsystems

(SUNW) - Get Report

and

EMC

(EMC)

will be the biggest winners. Both he and Young see a buildout in Internet infrastructure fueling demand for new servers. But Milunovich expects renewed demand for large UNIX servers, while Young sees a new computing model emerging and a resulting shift to smaller servers organized into "racks and stacks."

Computer Hardware*

* 1st-place winner Rick Schutte

left the sell side after the survey was completed.

Rate Their Stock Picks:

Which stock do you like best?

Milunovich: EMC

Niles: Compaq

Young: Gateway

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