In a note to clients yesterday, Bear Stearns analysts Andrew J. Neff, Bill Hand and Ted Chung responded to a number of developments at other companies to comment on current demand in the PC market -- key for Dell Inc. (DELL), Hewlett-Packard (NYSE: HPQ) and Gateway (GTW). The Best Buy conference call referenced can be read in its entirety. Key excerpt from the note:
Acer’s shortfall seems to reflect company-specific issues and increasing competition. Despite some investor concern that Acer’s 4Q05 shortfall may reflect weakening PC demand (particularly in Europe), based on our conversation with PC OEMs, we believe that Acer is facing heightened competitive pressures from DELL/HPQ as well as higher channel inventories after several quarters of strong growth. Moreover, it appears that PC demand remains tracking to vendor expectations. Stock impact: mixed for DELL, HPQ.
Lenovo’s recent restructuring targeted at improving operating structure. Contrary to concerns that Lenovo’s recent restructuring actions may have been motivated by softness in demand, our checks with contacts at Lenovo indicated these actions were targeted at improving the company’s operating structure outside its core Chinese market. Stock impact: mixed for DELL, GTW, HPQ (could create some near-term dislocation but establishes more cost competitive player in Lenovo).
Best Buy sees normal seasonal demand trends. While Best Buy did not specifically comment on the current demand environment on its earnings call this morning, the company noted that it expects demand to follow historic seasonal patterns. The company expects flat panel TVs, MP3 players, notebooks and game consoles to continue to drive growth in 2007. Stock impact: slightly positive for AAPL, DELL, HPQ, SYNA (lack of negative news with demand tracking in line with seasonality).