Push to Clear LCD Inventories Good for Dell and HP (DELL, GLW, HPQ)

On Monday, DigiTimes reported that:

AU Optronics (AUO), Chi Mei Optoelectronics (CMO) and HannStar Display have recently reduced their respective capacities for PC-use panels in an attempt to accelerate inventory clearance, according to sources at the panel makers. Although PC demand should start picking up in from the third quarter, the panel makers prefer to focus on clearing out inventory instead of expanding capacity to meet peak demand, indicated the sources.

We have commented in the past about what appeared to be a pending glut in LCD panels. This is the first serious action taken to clear out inventories before it gets any worse. Still, it won’t be a one-quarter issue.

The news is positive for PC makers such as DELL (DELL) and Hewlett Packard (HPQ) and negative for glass maker Corning (GLW).

[Full Disclosure: The author has put options on Corning with a $30 strike price.]

Still, the leading panel vendors have set goals to ship more units than the market is expected to bear, says a DigiTimes report from yesterday:

Global shipments of 32-inch panels will reach 17 million units in 2006, according to DisplaySearch. However, the combined shipment goals among makers is 20 million panels.

We saw a couple of takes on DELL recently that we felt were worth pointing out to our readers. First, Eddy Elfenbein deconstructs DELL’s sales, margins and earnings.

Also, Paul Kedrosky’s Infectious Greed found a gem from DELL’s CEO in a recent Bloomberg TV interview:

We don’t provide any forecasts, so it won’t be too difficult for us to hit them.

Like we said before, no more excuses.

DELL 1-yr chart: