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Hot off the Press - News & Commentary
Friday, 04/08/2005 - from Reuters

PC Industry Growth Slower Than Forecasted
Growth in the personal computer industry during the first quarter is slower than market leader Dell Inc. expected but the company anticipates growing much faster than the rest of the sector, just as it has in other times of turmoil, its CEO said on Thursday.

In an annual briefing for Wall Street analysts, Chief Executive Kevin Rollins said most of Dell's growth over the next three to four years will come from newer, non-PC businesses as it increases revenue to $80 billion annually from $50 billion.
Newer products for Dell, including storage, printers, and high-end TVs, can help insulate the No. 1 PC maker from boom and bust cycles, he said.

Rollins pointed to market research data that forecasts 10 percent growth in first-quarter global PC unit shipments, down from average growth of 16 percent in the prior six quarters.

" As we have come into (the first quarter), it's become clear things are a bit slower (than last year), a little bit slower than maybe we had even thought," Rollins said, referring to the 10 percent forecast by research group IDC.

" We are not worried about that," he added. "Otherwise we would have taken our numbers down," he said.

On Wednesday, Dell left its own revenue and outlook profit unchanged for its first quarter ending later this month, saying it expects revenue of $13.4 billion, up 16 percent from a year ago, and 37 cents a share in profit, up 32 percent.

However, Bernstein analyst Toni Sacconaghi criticized executives of the Round Rock, Texas, company for masking how dependent Dell remains on PCs and closely related businesses.

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" I think PC units actually end up driving about 75 percent of current revenue," Sacconaghi said of Dell's results. He defined PC revenue as sales of desktop PCs, notebooks and related services.
As the two-day analyst briefing wound down, shares of Dell rose 19 cents to $38.34 in afternoon trading on the Nasdaq.

Turmoil, But No PC Price Wars

Over the past decade, Dell has gained market share faster in years of industry decline than when industry fortunes were rosy, Rollins said.

Rollins ticked off omens of turbulence: IBM is seeking to pull out of the market by selling its PC business to Lenovo, recent management changes at Hewlett-Packard ) and Sony Corp., and struggles facing U.S. rival Gateway and other Taiwanese and Japanese competitors.

" Customers don't like turbulence," Rollins said of what he said was a key factor driving Dell's market share gains. "So they gravitate to the stable provider," he said.

Despite the turmoil, Rollins said that talk of PC industry price wars had not been borne out by sales data in recent years. He noted that while prices are in constant flux across different product categories, overall pricing remained stable.

Dell's own PC sales grew more than 50 percent faster than the rest of the industry during 2004. Unit shipments of Dell PCs grew 21 percent last year, compared with 13 percent growth in the rest of the industry, excluding Dell's shipments.

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