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Monday August 16, 8:08 pm Eastern Time

Notebook shortage may sap PC maker profits-analyst

By Eric Auchard

NEW YORK, Aug 16 (Reuters) - Financial results for notebook computer makers could suffer because of an industry-wide shortage of key components used to make display screens, an analyst with brokerage ABN AMRO warned on Monday.

ABN AMRO analyst Jonathan Ross said International Business Machines Corp. (NYSE:IBM - news) appeared to be affected by a shortage of liquid crystal display (LCD) chips and thus can only meet 70 percent of its notebook output goal for August.

The analyst said he was hearing of the shortfall from unnamed ``reliable sources.'' He said other major notebook PC makers that depend on Hitachi Ltd. for such LCD driver chips ``may be experiencing similar problems.''

He also estimated that notebook computers represent roughly 23 percent of Dell Computer Corp.'s (Nasdaq:DELL - news) sales turnover, 10 to 15 percent for Compaq Computer Corp. (NYSE:CPQ - news) and around 10 percent for Gateway Inc. (NYSE:GTW - news)

``Such adverse conditions should have a moderately negative earnings impact on notebook suppliers like Dell and Compaq,'' Ross said.

Dell spokesman T.R. Reid said he was not aware of the analyst's comments but noted that the notebook display shortage was an on-going, industry-wide problem which was not expected to disappear before the end of 1999. He declined to comment further ahead of Dell's quarterly report due out Tuesday.

A Compaq spokesman said the company had recently refreshed its commercial notebook product line with a range of new products ranging from lightweight ultraportables to heavy-duty ``desktop replacement'' notebooks. ``We don't know at this time of any significant supply issues,'' the Compaq spokesman said.

IBM spokesman Mike Corrado said he was not aware of any shortage and that IBM had multiple suppliers of LCD screens to alleviate any possible shortage from a single supplier.

Analysts believe IBM notebooks, including its ThinkPad line, contribute a disproportionate percentage of the profits for IBM's overall PC business, which is struggling to return to profitability.

Hitachi sells its chips to two Taiwanese companies, Quanta Computer Inc. and Inventec Corp. , Ross said.

Quanta supplies notebook screens to Dell and Gateway, as well as Siemens AG (quote from Yahoo! UK & Ireland: SIEG.F), Apple Computer Inc. (Nasdaq:AAPL - news), while Inventec is a supplier of screens to Compaq.

A Hitachi America spokesman said he could not immediately comment and referred calls to a spokesman for Hitachi Semicondutor (USA). He was not available to comment.

``The evidence suggests that while IBM may be bearing the brunt of the shortages, it is an industry-wide problem,'' Ross wrote in a note to his clients on Monday.

``While tightness is a good thing, these levels of shortages are likely to have a small but quantifiable negative impact on PC companies' earnings, at least in August and possibly into September,'' he said.

Despite the analyst's remarks, shares of PC makers mostly posted gains for the day.

IBM stock rose $3-15/16 to $127-7/16, Gateway climbed $2-7/8 to $84-5/8 and Compaq rose 9/16 to $23-5/8, all on the New York Stock Exchange. Apple added 7/16 to end the day at $60-1/2 in Nasdaq stock market action.

On the Nasdaq, Dell closed at $41-7/16, unchanged on the day. Dell reports results for its second quarter ended in July after the close of regular session trading on Tuesday. The Wall Street consensus is for Dell to earn 17 cents per share, according to brokers surveyed by First Call/Thomson Financial.

None of these analysts like this kind of threat to earnings. After 2000 these kinds of problems will be endemic in JIT systems.

-- Mike Lang (webflier@erols.com), August 16, 1999

Answers

I priced the ViewSonic 18.1 flat panel monitor a couple of months ago, at about $2,700.00. The boss said to wait a while, the price would drop. Well, the price last week was over $3,000.00!

Supply and demand.

Tick... Tock... <:00=

-- Sysman (y2kboard@yahoo.com), August 16, 1999.

When the shortages hit, Just In Time will become ridiculed as Just In Trouble.

-- Randolph (dinosaur@williams-net.com), August 16, 1999.

JIT a major contributor to the major increase in trucking accidents we have seen in the last decade. Article from Los Angeles Times (1999-08-16) discusses the pressures on truck drivers to get their "hot loads" (JIT loads) delivered hundreds and thousands of miles in ridiculously short times.

-- A (A@AisA.com), August 17, 1999.

Related to trucking and JIT -- check out your local supermarket. What you see on the shelves is what you've got, except for one, maybe two, truckloads of stuff in the back. Ever notice how at the end of a day, they're out of a lot of stuff? Shelves aren't replenished until that night or next day? That's because they get DAILY deliveries of stuff ordered 12 or 24 hours before. Their scanners feed an inventory computer as well as print out your receipts. Based on what you and everyone else bought, day of week, etc., they make up individual orders for each store. Which are then trucked in from who knows where -- company out of town warehouses, grower coop warehouses, etc. They are a half day to a day behind, because they restock the shelves at night from stuff they got during the day, based on previous night or early that day orders.

Take a look at the pallets. A pallet might have one case of X-brand olives, ten cases of canned peaches, two cases of pears. Another two cases of Wheaties, five of Cheerios, etc. These pallets are loaded back somehere else BY WHAT'S IN THE AISLES in your store, for your store.

If JIT fails -- either in truck dispatching or in the warehouses, they're gonna have to put tents over your store's parking lot to warehouse stuff -- if they can get it.

-- A (A@AisA.com), August 17, 1999.

A,

correctimundo - and where are the trucks gonna get the gas? where will non-compliant shipping dock at non-c docks coming from fof countries??

stock up now while you have a chance

-- Andy (2000EOD@prodigy.net), August 17, 1999.

my child takes two types of meds every day- month after month. we refill the prescriptions at the same pharm. month after month- not a month goes by when they "owe" us for one or both meds- they are always short the amount- and this is for a regularly filled script pre-y2k. Chance that we'll even be able to fill them after y2k? slim to none. JIT- hah.

-- farmer (hillsidefarm@drbs.net), August 17, 1999.

Hi Andy, I share your concern about the availability of fuel for the trucking industry after the first of the year. My wife and I were thinking about buying our own rig and going owner operator until I talked to several Y2K aware truckers. Their concsensous was that all the independents and small companies will be forced out of business next year due to fuel prices and availability, and of course the whole thing will grind to a halt if the phone networks go down or there is just no fuel at all to be had. One thing for sure, I am scheduling a week off starting the first of January, and the tanks on my rig will be full when I hit the driveway...Well days off are finished and I'm off into the great American Interstate system again, see yall in about three weeks.

-- Nikoli Krushev (doomsday@y2000.com), August 17, 1999.

Isn't it just sweet that we got rid of the railroads to move freight and clog the highways with trucks. Of course now the railroads are in such a mess it doesn't much matter. Of course if we can't get gasoline, then we have to, .........

-- gilda (jess@listbot.com), August 17, 1999.

Gilda: Got mules?

-- A (A@AisA.com), August 17, 1999.