The Buzz - 7

BlogWatch

Replacing Jobs?

Former Apple Computer Chief Financial Officer Fred Anderson resigned from Apples board of directors Oct. 4 amid a growing stock-option backdating scandal. Meanwhile, Apple CEO Steve Jobs apologized to shareholders, and the company acknowledged that he knew of some backdated option grants. Thats all it took to get some bloggers speculating about Jobs replacement if the scandal widens. "The issue of what will happen at Apple is clearly still open," wrote Douglas McIntyre, of the 24/7 Wall St. blog.

In McIntyres blog (247wallst.blogspot.com/2006/10/who-would-replace-steve-jobs.html), he named eight possible replacements, including Tim Cook, Apples chief operating officer; Tony Fadell, senior vice president of Apples iPod division; Jim Allchin, soon-to-be-retiring co-president of Microsofts Platforms & Services division; and Sue Decker, chief financial officer of Yahoo.

PC Growth

Will Vista freeze the PC market?

With Windows Vista looking like its going to be out in time for January, Wall Street types are surveying the field to see how the launch of Microsofts latest operating system will affect the PC food chain. In a UBS Investment Research note dated Oct. 3, the vibe was fairly optimistic.

Here are the take-aways from the UBS research team, led by New York-based analyst Heather Bellini:

• Bellini doesnt expect Vista to lead to a huge upgrade cycle for PCs. Although Vistas "business impact will not match that of Windows 95," the new operating system will spur more demand than Windows XP and Office XP.

• Microsoft will offer technology guarantees—or coupons to upgrade to Vista for any PC bought this holiday season—to ensure computer sales dont freeze ahead of the launch. UBS reckons that Asia-based ODMs (original design manufacturers) such as Compal Electronics, Quanta Computer and Wistron will see normal sales trends in October and November, but December will be a wild card. Manufacturers such as Dell, Acer and Hewlett-Packard also could face a slowdown and negotiate deals with Microsoft.

• As PC sales face an uncertain December, Apple is likely to pick up the slack and benefit from strong unit growth.

• Retailers may face a hit on computer sales. Although Vista coupons may cushion the blow, look for Best Buy and Circuit City Stores to rely on consumer electronic sales for the holiday season. Bellini said that retailers will count on high-margin items such as plasma TVs and then benefit when the Vista sales cycle begins in January.

Sales

Enterprise hardware demand increases

On the enterprise side of the IT demand equation, the spending climate also appears fairly optimistic. According to a channel survey released Oct. 2 by Daniel Renouard, an analyst with Robert W. Baird, "seasonal demand in server/storage is improving."

The survey, which polled 40 resellers and distributors, revealed that third-quarter enterprise hardware sales were as expected and that the fourth quarter is looking better. Specifically, 88 percent of resellers expect the fourth quarter to show stronger demand. Among resellers, 77 percent said sales should be up anywhere from 5 to 15 percent in 2007, said Renouard in Milwaukee.

Among the highlights:

• HP is gaining. Fifty-five percent of resellers said they believed HP was ahead of its projections. More important, "HP garnered the most votes among resellers intending to sell more of the vendor in 2007," said Renouard. "We note this is in stark contrast to a year ago."

• Hard drive sales are strong. "Distributor contacts confirm our thesis of accelerating demand, stabilizing pricing, and declining inventories in particular for hard drives," said Renouard.

• Pricing is steady. Technology executives arent likely to get great deals. Renouard described pricing as "benign" for vendors. Resellers said they werent concerned about prices across storage, servers and PCs.

• Government demand is slowing. Apparently, the feds are easing off IT spending a bit, as the government allocates money elsewhere.

—Compiled by Larry Dignan

By the Numbers

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40%

Portion of total online advertising spending attributed to search in the first half of 2006