Six Reasons For Strength In The PC Supply Chain

There are signs of strong second-quarter demand for PC-related components, according to Pacific Crest’s Michael McConnell. McConnell lists six factors contributing to the optimism on demand in the PC sector.

Demand elasticity from low DRAM and CPU pricing, cutting the bill of materials for by upwards of $100.

Depleted IC inventory.

Renewed optimism on Microsoft (MSFT) Vista demand in the second half.

Higher-than-normal build at Dell (DELL) to prepare for entry into the retail market in the second half.

Restocking at Hewlett-Packard (HPQ) after the company reduced inventory by more than $1 billion in its fiscal Q2 ended April.

Intel’s (INTC) launch of new Santa Rosa notebook platform.

McConnell Monday raised his price targets on Intersil (ISIL) to $36 from $34; for Nvidia (NVDA) to $43 from $38 and for Texas Instruments (TXN) to $42 from $41. He notes that he has above-consensus Q2 estimates on Intersil, Nvidia, Texas Instruments, Intel and Fairchild Semiconductor (FCS), and asserts that “they are the five best fundamentally positioned companies” that he covers heading into Q2 results.

Monday morning, Intel is off 25 cents at $23.99; Intersil is down 8 cents at $32.94; Nvidia is down 2 cents at $39.53; Texas Instruments is unchanged at $36.86; Fairchild is up 60 cents at $19.70.