Goldman: iPad + Slowing Economy = Lousy PC Sales
Quarterly earnings reports are due to start coming from numerous tech companies next week, and Goldman Sachs isn’t expecting much in the way of good news from any of them. The economic slowdown has hurt spending by both consumers and businesses. And the iPad continues to maul the conventional PC market.
In a research note to clients today, Goldman said that while most tech companies should report results in line with their forecasts, the forward guidance they give will be less than optimistic. “While we expect most of the September quarter companies to be able to meet expectations for the quarter, we also expect an increasingly cautious tone from all of the companies, and we continue to see risk to 2012 consensus estimates for nearly all of the names in our space.”
To that end, Goldman revised its PC unit sales forecast downward. Following the latest PC market data from the research firm IDC, Goldman says the demand environment for PCs is “even more difficult than we had previously envisioned.”
Slower spending, the end of a PC refresh cycle and cannibalization by the tablet market — which we all know is really just an iPad market — has prompted Goldman to slash its PC unit sales growth forecast to 2.1 percent for 2011; 4.3 percent in 2012; and 6.9 percent in 2013. The iPad 3, already said to be in production and expected early next year, won’t give the PC makers any help.
One key problem PC makers face is pricing: In order to avoid being stuck with unsold inventory, manufacturers, resellers and retailers will be forced to slash their prices to the bone and then some, which will hurt their already-thin profit margins. This is why Goldman rates Dell — now the No. 3 PC maker, behind Hewlett-Packard and Lenovo — a “sell” right now. Goldman expects the average selling price on PCs to drop nearly 3 percent in 2011, and more than 9 percent in 2012.
The exception to its tech pessimism? Apple, naturally. Reporting its results on Oct. 18, Apple isn’t suffering from the economic headwinds. Goldman expects Apple to sell 13 million iPads in the quarter, which would represent growth of 211 percent year over year.
Goldman expects Apple to report earnings of $7.30 per share on $28.7 billion in sales, but admits that could be conservative, because who knows how good today’s launch of the iPhone 4S will turn out? As Goldman puts it: “Indeed, if iPhone units are flat sequentially, this would support earnings per share of approximately $8.00 for the quarter.”