Technology Hardware Sector Showing Signs of Rebound
Signs are emerging that the nearly year-long trough in demand for personal computers, servers, copiers and other technology hardware may be nearing an end.
Excerpted from U.S. Technology Hardware: Six-Month Update
Moody’s outlook for the U.S-based technology hardware industry is stable, reflecting developing data points and anecdotal evidence that indicate an easing of the sharp global contraction that began in the fourth quarter of 2008. Better-than-expected personal computer sales and improving semiconductor order trends point to firming demand for technology hardware.
- We expect global information-technology spending to increase 2% in 2010 following a 6% decline this year.
- Corporate spending on PCs and other technology hardware has been weak but should improve due to aging of the installed base.
- Consumer PC unit sales have been surprisingly resilient and should rise 5% to 10% next year.
- Average selling prices for PCs will decline this year by about 12% – the high end of the historical range – before firming somewhat in 2010.
- Cash and liquidity will remain solid for the industry. Share-repurchase activity should remain well within the confines of free cash flow.
Despite pockets of stabilizing demand, the tech hardware business will remain at low ebb until worldwide GDP growth rebounds to historic norms.
Our stable outlook indicates that we don’t expect major business drivers such as IT spending and PC unit sales to worsen materially over the next 12 to 18 months. But business conditions will be bumpy.
[ Dell (DELL) reported better-than-expected second second quarter results yesterday, based primarily on cost cutting. Dell's more optimistic outlook led analysts to raise their price targets on the company today.]
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