The backpedaling on PC sales projections has begun, as a weaker-than-expected second quarter has analysts retreating from even the mildly hopeful forecasts made earlier in the year.

In a report released this week, Credit Suisse First Boston said it expects PC sales around the world to stay flat for 2002, reflecting an expected decline of 7% for the second quarter. Previously, CSFB had predicted annual PC sales growth of 5% and a second-quarter decline of 3% in 2002.

The report arrived with a smattering of other indicators pointing to a slowdown in what was hoped to be a modestly better year for the personal computer industry.

"A rewriting of Beckett's

Waiting for Godot

might find two PC analysts waiting under a tree for the PC replacement cycle to show up -- even if it did appear, it is uncertain whether they would recognize it," wrote CSFB analyst Kevin McCarthy.

The bank said it has reduced its growth outlook after digesting

Intel's

(INTC) - Get Report

announcement last week that it would see lower-than expected second-quarter revenues and that third-quarter demand so far doesn't look strong.

Also, graphics chipmaker

Nvidia

(NVDA) - Get Report

was downgraded Wednesday on concerns about weak PC demand. The stock dropped nearly 9%, losing $2.65 to close at $27.95.

In a research note, RBC Capital analyst Rui Cardoso said data from the Computex trade show and checks with Taiwanese motherboard suppliers indicate sales of the computers that use Nvidia's chips aren't likely to pick up soon. Last quarter, about 65% of Nvidia's sales were to desktop PCs.

After having its estimates

lowered earlier this week,

Micron,

(MU) - Get Report

second-largest maker of DRAM chips for PCs, was downgraded to hold from buy Wednesday by Dresdner Kleinwort Wasserstein. Among the reasons, lower-than-expected second-quarter PC demand, now expected to drop 5% sequentially.

In light of continued downward revisions in tech demand, the 18-member S&P semiconductor industry group, which includes Nvidia and Intel, is off 39% since Jan. 1.

The S&P computer hardware industry group, a basket of eight stocks including heavyweights

Hewlett-Packard

(HPQ) - Get Report

and

Dell

(DELL) - Get Report

, has now dropped 27% since the beginning of the year.

As for the remainder of 2002, CSFB said it now expects only minor PC sales growth into the third quarter, citing worries that a reduction in state budgets will crimp the back-to-school selling season. However, its estimate for the year reflects an assumption of double-digit growth into the fourth quarter based on expectations of "an IT budget flush and/or a holiday pick-up," the bank said.

CSFB said consumer sales, which drove a recovery in unit sales in the fourth quarter of 2001 and first quarter of 2002, have since softened. It singled out

Gateway

(GTW)

and

Apple

(AAPL) - Get Report

as the two companies with the greatest exposure to the weak consumer market. However, it left revenue estimates unchanged for companies under coverage.

McCarthy continues to hold out hope for a return to double-digit unit-growth rates in 2003.

"For now, we'll just wait and continue to rate all of our PC stocks, save Dell,

as hold," he wrote. Reflecting Dell's relatively stronger prospects, the bank rates it a buy.

While PC companies and chipmakers alike have floundered amid continuing weak demand, Dell managed to quietly gain market share in the first quarter from competitors H-P and

Compaq

. That trend appears likely to continue, given that Dell has gamely stuck with its earnings forecasts while competitors have reluctantly scaled down their profit outlooks.

Just last week, the newly combined H-P (with Compaq), which currently claims the biggest share of the PC market, warned that its revenue will slide in the second half of 2002 as it consolidates product lines and contends with lackluster demand.

But this Monday, Dell's CFO said the company expects to see sequential growth in its fiscal third and fourth quarters, according to a report from Bear Stearns.

The company also affirmed guidance it issued in May for its second quarter, which called for an 8% year-over-year revenue gain to $8.2 billion and a 12.5% gain in profits to 18 cents a share.