Dell turns conservative on Asian PC demand

By Jennifer Tan

SINGAPORE: Dell Computer Corp, the world's number one personal computer

maker, has turned cautious on PC demand in Asia in the months ahead, blaming

continued technology spending cutbacks as economies slow to a crawl. "As

far as the (calendar) second quarter goes, I can say with certainty that we've

seen purse-string tightening in the Asia-Pacific/Japan region," William

Amelio, Dell's Asia-Pacific president, told Reuters in an interview. "We

think the third quarter is going to be more of the same."

Amelio indicated he was cautious about regional PC demand in the coming

months, saying he believed International Data Corp Asia Pacific's forecasts for

PC shipments in the July-September quarter were overly upbeat. "The IDC

numbers for the third quarter are probably more optimistic than what I would

believe right now," he said, adding that more severe cutbacks were seen in

Japan, Taiwan, South Korea, Singapore and Malaysia.

According to IDC, Asia-Pacific shipments for desktops, notebooks and servers

are forecast to rise to 5.61 million units in the third quarter, up from 5.19

million in the second quarter. Japan's unit shipments are projected to reach

3.29 million in the third quarter, down from 3.32 million in the second quarter.

"We expect IDC will bring the numbers down by the time the quarter

ends," Amelio said.

Reflecting the depth of the tech crunch, Dell's rival Gateway Inc announced

on Wednesday it plans to shut down its Singapore marketing office and Malaysian

manufacturing plant as part of a 25 per cent cut to its global workforce.

Glass half empty

Amelio said Texas-based Dell was "keeping its fingers crossed" that

a seasonal uptick would materialize later in the year, buoyed by the launch of

Microsoft Corp's much-touted new operating system Windows XP and Intel Corp's

high-end Pentium 4 chips. "If you ask me: optimistic or pessimistic? Right

now, I'm going with 'glass half empty'," he said. "Even though these

events are happening, I'm hoping it would help things not to go down

further."

Intel, which makes the microchips in 80 per cent of the world's PCs, has said

it expects demand in the second half of the year to increase from the first half

due to back-to-school sales and holiday shopping, despite the weak economy.

Gartner Dataquest senior analyst Lillian Tay said the jury was out on whether

the seasonal boost would take place.

"Our best-case scenario is that demand may be a few percentage points

higher in the second half versus the first half, but the uptick would not be on

the scale of previous years," she said. "The worst-case scenario is PC

demand is flat."

More downside to come?

Amelio warned there might be more downside for the US economy. Given the lag

effect of that on Asia, "there is still room for things to go down

further". Nonetheless, Dell's PC shipments in Asia-Pacific/Japan should

remain in the double-digit range, he said. "There is still spending

happening out there in the market despite the cutbacks and Asia-Pacific is

definitely the growth engine of the company from the unit point of view,"

he said.

Dell's Asia-Pacific/Japan unit shipments for the second quarter rose 44 per

cent, while revenues gained 15 per cent. Lower PC saturation in the region,

compared with the relatively more mature US market continued to drive demand.

Despite Japan's economic gloom, demand for servers will continue to spur Dell's

growth in that market, Amelio said.

Caution rules

Gartner's Tay said Dell was right to be cautious. "Demand in their more

mature markets could slow further in the coming months," she said. "In

the markets where growth is robust, like China and India, Dell is not as

entrenched there and they cannot compensate for the slowdown." Gartner

estimates China and India contributed 40 per cent of Dell's Asia-Pacific unit

shipments in the six months to June 30.

(C) Reuters Limited 2001.