Changed industry: computers become a kind of commodity, to dismay of makers; excess capacity, fast pace of innovation keep prices declining and profits low; but corporate buyers benefit
Article Abstract:
The computer industry is in a difficult time: facilities are closing; workers are being laid off; and there is excess capacity worldwide. Computers have become 'commodities': profit margins are narrow; and the situation is made more difficult because of constant innovation. A reason for the evolution of this commodity-like market has to do with Intel Corp's and Microsoft Corp's functioning like monopolies, selling to everyone, so that computers built around Intel and Microsoft products tend to be similar. Manufacturers in the computer industry are fighting back, reorganizing themselves or making cooperative agreements with other companies. An example of what falling prices can do is suggested by Pier Carlo Falotti, chief of Digital Equipment Corp's European operations: 'We have to sell 70 percent more volume every year,' says Falotti, 'just to stay even in revenue.' Jobs in the computer industry were down by about 4.3 percent in 1990, to 424,000, which is about what employment in the industry was in 1980. The market is a good one for buyers: prices are low and innovation presents new opportunities.
Publication Name: The Wall Street Journal Western Edition
Subject: Business, general
ISSN: 0193-2241
Year: 1991
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Digital says profit estimates could be high: computer firm says sales are soft in U.S., U.K. in fiscal fourth quarter
Article Abstract:
Digital Equipment Corp explains to analysts that earnings estimates for 4th qtr FY 1990 appear to be too optimistic. Most analysts have been forecasting net income of $1.60 to $1.80 a share, but after DEC's announcement, some have revised estimates to as low as $1.25 a share. DEC places the blame for the weak performance on soft sales in the US and unexpectedly slow sales in the UK, where high interest rates are deterring purchases. Analysts also point to a low point in DEC's product cycle. They say DEC's high-end VAX 9000 had been expected to contribute to revenue in the 4th quarter, but instead it will not make a significant contribution until FY 1991. Also, sales of DEC's smaller VAX 3000 computers have tailed off in the 4th quarter because customers are awaiting a replacement product to be announced soon.
Publication Name: The Wall Street Journal Western Edition
Subject: Business, general
ISSN: 0193-2241
Year: 1990
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