updated 03:35 pm EDT, Mon October 6, 2008
UBS on Apple Dell HP
Financial researchers at UBS today helped trigger a major share sell-off at the three top US-owned computer builders by dramatically reducing the institution's target share prices. Company analyst Maynard Um today dropped the expected prices of Apple, Dell and HP from their original $195, $50 and $20 to $125, $48 and $17 respectively and attributed the cut exclusively to poor economies in Europe, the UK and the US having a negative impact on PC buying.
Um notes that UBS has lowered its growth estimates significantly both in the short term as well as for next year, dropping the total industry's growth in the fall from 11 to 9.7 percent and its 2009 outlook from 12 percent to 9.8 percent. Much of the future decline is said to be coming from a push towards lower average selling prices for PCs, particularly with the addition of netbooks.
Apple may be particularly hard-hit, the analyst warns. Although UBS and other investment groups had believed the company would largely be insulated from the economic crisis, the California firm is now thought to be more heavily impacted by lowering gross domestic product (GDP) and so may have to ship fewer Macs as well as reduce the average selling price of a Mac downwards to match.
The expert is quick to add that system builder's business is still solid and that prices for individual components are likely to continue dropping, preventing the company's profit margins from dropping as substantially as they might otherwise.
Dell and HP aren't as seriously affected given their focuses on lower cost PCs but are still expected to feel some of the economic damage as their heavy investments in business and home PC spending respectively will expose them to problems. About 85 percent of Dell's sales come from enterprise-level business, according to estimates.
The news comes just as ChangeWave has published a study warning of a rapid drop in plans for spending by US residents. A September survey of over 4,000 people suggests that more than half of the group, 52 percent, plans to spend less money over the next 90 days. The increase is a marked jump from 44 percent in August and is matched by a sharp drop in the amount of people spending more, with just 18 percent planning extra spending versus 24 percent a month earlier.
A large number are directly attributing their more cautious spending to economic concerns; 29 percent primarily cite a desire to reduce debt, while 26 percent simply plan to save more money. Inflation and energy are still top issues but have ultimately declined to 49 and 38 percent each.
Both Dell and HP have launched their first entries into netbooks in recent months as well as lower-cost designer PCs but have so far been given no response from Apple, which isn't believed to be entering into netbooks and may at most launch a lower-priced MacBook in the short term.