November 10, 2011 11:50 pm

Thai floods may force decline in PC market

After half a year of worldwide growth, the personal computer market may decline for the next two quarters because of component shortages from the flooding in Thailand, analysts said on Thursday.

Severe damage to manufacturing facilities and infrastructure have followed monsoons in the country that produces more than 40 per cent of the hard-disk drives that come in PCs, servers and other computing gear.

Market researcher IDC said about half of Thailand’s disk drive capacity had been affected and that PC shipments for the fourth quarter of this year might be as much as 10 per cent lower than earlier expectations as a result.

“The full extent of the damage to HDD industry factories will not be known until the floodwaters recede,” IDC analysts wrote. “In a worst-case scenario, total PC shipments could be depressed by more than 20 per cent” in the first quarter from previous forecasts.

Investment bank Goldman Sachs, which had previously predicted that PC shipments would increase the fourth and first quarters from a year earlier, said it now expects them to fall by 3 per cent and 8.5 per cent respectively.

Although the projected shortages will have the most impact in the comparatively weak selling period after the year-end holidays, they deal a blow to an industry just finding new footing. Explosive growth in sales of tablet computers and smartphones have cut into the PC business and the big manufacturers are still casting about for answers.

Both Goldman and IDC said they expected the largest PC sellers, including Hewlett-Packard and Dell, to be able to meet demand despite the disk drive shortfall. Smaller companies without as many long-term commitments, negotiating leverage and resources to land new suppliers may run out of products to sell, Goldman said.

But even the bigger companies will face pressure on their profit margins as the costs rise for the components still available.

“We believe that HDD constraints will become much more pronounced in the January and April quarters, which will likely weigh on Dell’s outlook,” Goldman analysts wrote ahead of the Texas company’s third-quarter earnings report on Tuesday.

Dell said it was working closely with suppliers to lessen the impact but that it expected limited supplies.

HP declined to comment, citing the quiet period before November 21, when it will report its first quarterly earnings under new chief executive Meg Whitman.

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