May 2001 Industry Update

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PC Market Update

Back in March, I wrote that there were some signs of a recovery in the PC industry, and we could see things starting to pick up by April or May. Since that time, I have heard from a few smaller manufacturers that they had a good March, a decent April (considering it is traditionally a very slow month), and May is looking fairly good. Larger manufacturers seem to still be suffering, however, so the jury is still out.

There may be several reasons for the smaller vendors doing well, including the fact that smaller businesses can generally adapt to changing conditions a bit quicker than larger companies can. In addition, larger companies will generally overlook small niche markets, which can provide good revenues for the small companies who address them without a lot of competition. Based upon discussions with several manufacturers over the past several weeks, this seems to be the situation today, and might be something for struggling vendors to pay attention to. Manufacturers who fall into this category include IWill, EpoX and Tyan, amongst others.

Recent reports from major publications and financial analysts seem to be highly contradictory, with some saying the market has bottomed and we are already on the way to recovery, and others claiming we have many more months of market crisis ahead of us. Even with prices of processors, memory and storage at an all-time low, buyers seem to be willing to wait. It may have something to do with all the negative press surrounding the newest products, such as P4 (performance), DRDRAM (price), Athlon (power), and DDR (stability). Nobody wants to waste their money, so perhaps buyers are just waiting for a clear winner… because they can. After all, for most applications, if the choice is to lose a little productivity with an older system versus investing in a ‘problem’ technology, most people would chose the former. I also have talked to several individuals who have realized that the current price wars will continue to cause prices to drop, so they are simply waiting around for the lowest prices… again, because they can. This would seem to be a vicious circle for manufacturers (and a joyous one for consumers).

One can always tell when the competition is heating up by the number of rumors circulating and the amount of mud slinging that goes on. During the past several weeks, we have heard that P4 sales are dismal, that Intel’s .13u process will be delayed, that Intel is abandoning DRDRAM and that the P4 throttles back under a full load. On the AMD side we have heard that Palomino was delayed due to manufacturing problems, the 760MP chipset will be delayed, and instability problems plague the DDR systems. While there may be some truth to any or all of these rumors, these stories should be obvious that these two companies are in the midst of a real market battle, if you didn’t already know it.

One item that is of particular interest to me is that Dataquest revealed Dell increased share in the workstation market by almost 10% last year, however total workstation shipments fell by over 9 percent worldwide. Interestingly, the Dataquest report also indicated that part of the reason for the lower shipments was customers buying PCs instead of workstations. It would appear that x86 desktop processors are now powerful enough to satisfy the requirements of many workstation users, and it stands to reason this trend will likely continue this year with ever more powerful processors being released and memory prices dropping like a dot com stock price.

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