IDC Revises Lower Its Estimates for Fourth-Quarter PC Sales

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The fears that PC sales were weakening have been around for most of this quarter, but Apple's (AAPL) - Get Report post-close warning Tuesday gave those fears some legs and a release from research firm International Data Corp. this morning won't help matters either.

IDC said worldwide PC shipments will hit about 40.2 million units in the fourth quarter, representing a growth of 19.6% over the same quarter last year and sequential growth of 19.8% from third-quarter 2000. The research firm had previously forecast growth of 20.3% from the year-ago quarter. It also said it was revising downward 2001's total PC shipment growth to 16.6% from 18.8% in 2000. The bright point in the report was that the portables market was strong and had outperformed expectations in the third quarter. IDC said it's anticipating shipments to grow close to 32% worldwide in the fourth quarter.

"Although it's clear consumer demand in the United States is weakening, buying in other regions remains strong," said Loren Loverde, director of IDC's Worldwide PC Tracker program. "PCs remain the dominant means of accessing the Internet, and a lot of people out there are still buying PCs to get online. The portables segment is also strong in all regions, boosting sales in both consumer and commercial markets."

The report said consumer spending was strong through the third quarter in the U.S., but early warnings from retailers and direct distributors suggest weaker consumer demand in the latest quarter. IDC is predicting depressed demand will continue for an additional two to three quarters before it picks up again. The company said by that time the Windows 2000 upgrade cycle begins to kick in and PCs bought in 1997 and 1998 for millennium compliance will be reaching the end of their life cycle.

IDC found that the Asia/Pacific market, excluding Japan, is still growing at an accelerated pace, with year-on-year growth of 42.7% in the third quarter, beating expectations by 6.5 percentage points. The firm cited continued success of local vendors, growth of affinity distribution models, a thriving portables market and strong consumer demand for the increase. Revised forecasts for the region call for fourth-quarter shipment growth of 33.4% year-over-year.

In Japan, fourth-quarter growth projections were revised upward to 29.4% year on year, following a slower-than-expected third quarter. Strong consumer demand from repeat and first-time buyers, as well as recovering business investments, are driving the market.

This morning,

Bear Stearns

cut

Hewlett-Packard's

(HWP)

2001 EPS estimate to $1.80 from $1.95 and downgraded the stock to neutral from attractive because of concerns about the industry. And

Goldman Sachs

lowered 2001 EPS estimates for

Microsoft

(MSFT) - Get Report

to $1.88 from $1.91 because of sluggish PC sales.