The Zacks Analyst Blog Highlights: Apple, Gartner, Ingram Micro, Arrow Electronics and Tech Data

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Sep 13, 2011, 09:30 ET

CHICAGO, Sept. 13, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Apple Inc. (Nasdaq: AAPL), Gartner Inc. (NYSE: IT), Ingram Micro Inc. (NYSE: IM), Arrow Electronics Inc. (NYSE: ARW) and Tech Data Corp. (Nasdaq: TECD).

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Here are highlights from Monday's Analyst Blog:

PC Market Losing Its Lustre

Uncertainty continues to loom over the PC market. The rise of next generation ultra-portable gadgets (mainly tablets) has taken the market by storm, diverting consumer spending dollars from traditional desktops and notebooks.

The success of Apple Inc.'s (Nasdaq: AAPL) iPad has convinced the world that a thin rectangle portable touch screen with long battery life is enough to take care of most of our daily computing needs. While there was initial opinion that tablets were market expansive and there could be some truth to this, researches are now forecasting that iPad unit sales will grow at an average annual rate of more than 50% from this year to 2015. The fact that tablets are much cheaper is obviously playing a role as well.

During the second quarter of 2011, PC shipments in the U.S., Western Europe, U.K., France and Germany reduced 5.6%, 18.9%, 15.0%, 17.8%, 13.3%, respectively on a year-over-year basis, due to weak consumer demand.

The picture for the PC market has become clearer, with the research firm Gartner Inc.'s (NYSE: IT) recently lowered forecast. For fiscal 2011, Gartner's growth estimate went from 9.3% to 3.8%, based on the sluggish economic growth in Western Europe and the United States (an offshoot to the debt crisis), and the growing demand for media tablets, mainly iPad.

The macro concerns in the two largest and most mature markets had a severe impact on corporate and government IT spending, which also influenced Gartner's forecast. The research firm currently expects the PC market to grow 10.9% in 2012, down from the original projection of 12.8% growth.

Vital Statistics

The PC market in developed markets is mature. Moreover, the commoditization of PCs has resulted in price wars. The players can only adjust product prices in an effort to maintain their respective market shares. The advent of lower-cost alternatives is not making things any better. In this backdrop, most of the growth in traditional PCs is in fact coming from emerging markets, where pricing is an important consideration deciding the purchase.

As a result, a number of Asian companies, such as Acer, Lenovo and Samsung, with significantly lower-cost manufacturing capabilities have started making headway. The many pressures on pricing have made PCs an essentially low-margin business.

The softening of demand due to the greater-than-expected popularity of tablets and the Japan crisis has also resulted in some channel inventory. Accordingly, information technology (IT) distributors such as Ingram Micro Inc. (NYSE: IM), Arrow Electronics Inc. (NYSE: ARW) and Tech Data Corp. (Nasdaq: TECD) are all seeing inventories piling up.

During the second quarter of 2011, customers placed orders ahead of demand in order to minimize potential disruptions related to the earthquake in Japan. The sector is currently looking to cut the level in the upcoming quarters.

A decline in demand from other factors could lead to a more aggressive reduction in inventory, posing additional risk to the component companies. This could in turn result in protracted weakness in the industry, until the excess is burnt off. The silver lining is the 2011 holiday season, which could help the process if orders are cut significantly.

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