Personal computers are, let's face it, pretty commoditised affairs. Apart from a few bells here and whistles there, they are all of a muchness. Some are household names, others more popular with business users. Even equity investors see little
difference - although their share prices tell different stories.
Consider the two largest US-based PC makers and Intel (NASDAQ: INTC - news) , whose microprocessors power most of the computers they produce. Hewlett-Packard and Dell - once the world's biggest manufacturer but now third after Taiwan's Acer - both trade on 12 times next year's earnings, and Intel is only slightly more richly valued on 13 times. At a discount to historic valuations and the broader market, this suggests that sub-par growth prospects for all three companies lie ahead.
Recent performance has diverged, though. HP's share price has rallied strongly over the past six months as earnings forecasts for 2010 have risen by 8 per cent. The hardware maker's shares are now within touching distance of their 2008 high. Yet expectations for Dell (NASDAQ: DELL - news) are largely unchanged and its shares languish well below last year's levels. Meanwhile, Intel's shares have risen by 60 per cent since April and its earnings estimates have risen by three-quarters.
In large part that reflects a different mix of businesses. HP sells more to consumers, who are responding to the introduction of Microsoft (NASDAQ: MSFT - news) 's new operating system, Windows 7, and are snapping up cheap netbooks. By comparison, only a fifth of Dell's sales, and barely any profits, come from individual consumers.
Yet prospects for both makers are brightening, with market researcher IDC forecasting global growth in PC shipments of 11 per cent annually through to 2013, and 5 per cent in value terms. Companies' computers are ageing, with about 70 per cent of Dell's customer base still using Windows XP (a version released back in 2001), according to Deutsche Bank (Xetra: 514000 - news) . As they start to spend on upgrades next year, Dell's shares should stand out from the pack.
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