The PC industry saw two very important things happen this week:
2) Both Samsung and Micron (NASDAQ:MU) noted weak DRAM memory pricing trends, which are dragging on both company's earnings.
Now remember, back on July 14th when PC's were still hot, Intel (NASDAQ:INTC) CEO Paul Otellini said the following about his company's Q2 performance:
"In Q2, Intel posted its best quarterly results ever as the economics of the world continue to reflect renewed economic momentum."
Fast forward six weeks to the company's August 27th mid-quarter update, and Intel was forced to lower its Q3 revenue and gross-margin guidance due to “weaker than expected demand for consumer PCs in mature markets.” AMD (NASDAQ:AMD) made similar comments on September 23rd.
The memory makers confirm the trend - the PC downturn that basically came out of nowhere in August is still in effect.
Now here's how Gartner pegged PC industry growth in recent quarters:
Q3 2009 +0.5%
Q4 2000 +22%
Q1 2010 +27%
Q2 2010 +21%
Q3 2010 ??? (but looking like crap)
Q4 2010 ??? (lapping +22% number)
Now we know that Q3 of this year is looking like crap - but look at how quickly industry growth surged from Q3 to Q4 in 2009.
That means the PC industry is right about to lap three quarters of 20%+ growth during an economic slowdown, precisely when more interesting and disruptive mobile devices like the Apple (AAPL) iPad and Amazon (NASDAQ:AMZN) Kindle are taking off, taking consumer mindshare along with them.
If the PC industry slowed so much during the key back-to-school period, how's it going to do in the all-important holiday season? The numbers are bound to look like crap relative to Q4 of last year.
However, Apple seems well-positioned to weather the storm:
1) The iPad's better-than-expected sales gives Apple something a cushion when it comes to hitting the numbers.
2) College students are rapidly switching to Apple, which will offset some of the broader industry weakness.
3) Those weak memory prices will boost Apple's gross margins. Remember, Apple doesn't regularly cut prices the way commodity makers like Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) do. . That entry-level Macbook will be $999 no matter how cheap the guts inside get.
Disclosure: long AAPL