Morgan Stanley says we are near the trough in the decline of computer sales and that it’s going to be all uphill from here. But why? WHY? The article points to no particular reason for the upturn they are predicting beyond “the cycle.” This is about the same as the constant rosy predictions from the ratings agencies over the last few years. It’s always “buy” and “AAA” but no reason WHY!
From the article:
It’s been a grim recession for computer companies. First quarter PC shipments were down 8.1% from year ago levels and down 14% from the prior quarter. But that’s what happens in recessions. The newer data, though, says green shoots are sprouting, with important implications for business and investors.
As this chart shows, the severe drop off in demand has been punishing. But with technology advancing â€” and computers aging â€” the seeds for a replacement cycle are in place.
There is no rational reason to think PCs will auto-replenish based on needs. Aging hardware can run less demanding apps in the cloud just fine. Running a business I am holding off on hiring. Thus being a growth business we have extra hardware on hand even if we simply hold back. Other businesses have done layoffs so logically they have computers by-the-extra. Why would all of the declining lines suddenly turn back up Morgan Stanley? They won’t.
As the article indicates Netbooks WILL go up, but at a lower cost per unit. If people switch from MS Office to Google Apps this takes less hardware, not more. And it lets employees work remotely without installing a VPN at great expense and frustration. The article acknowledges this but doesn’t reconcile the amazing recovery in the graph with the stated:
…a key driver of demand in the next 18 months will be smaller and smaller computers. The growing popularity of netbooks, those smaller laptops that can easily fit in a briefcase or handbag and offer basic computing tasks, such as web browsing, are the prime case in point. Netbooks are cheap, and with new, high efficiency processors now on the scene, they will likely get more powerful, and cheaper still.
My point here isn’t that PC sales are in a slump, an article from May that suggested we were at the bottom (nope!), and are going to stay that way for a while. My main point is that Morgan Stanley analysts are still viewing the world through rose colored glasses. And that didn’t work out so well for us last time.
Why do I chew on these bones? Because the market has to correct. Stop trying to delay it, pull the band-aid off, review home values, but lets start talking with candor again please.