Monday, February 23, 2009

Happy Birthday, Mike

Driving into work this morning, the drivetime radio show’s list of celebrity birthdays for Feb. 23 included the usual entertainers such as Peter Fonda (70) or Dakota Fanning (15). They didn’t list important historical figures born this day such as G.F. Handel or W.E. B. Dubois.

However, they did mention Michael Dell, aged 44 today — entrepreneur, CEO, author, economic ambassador and philanthropist.

Unfortunately, the news today was not pretty for a man whose fortunes are tied to his eponymous company. When I got back from teaching my entrepreneurship class, I found this AP article in my in-basket.

Sector Snap: PC makers down on report
Associated Press, 02.23.09, 03:06 PM EST

Shares of computer makers fell Monday after Morgan Stanley analysts said that the recession will pull down PC demand further this year than previously forecast.

After visiting Asia, where most PCs are made, the analysts led by Kathryn Huberty, now expect PC revenue to drop 24 percent this year and unit volume to fall 11 percent. They had previously expected a 10 percent revenue decline.
Teasing out the numbers, this means that the average selling price for PCs will fall about 15%.

The article goes on to report that analysts reduced revenue and profits estimates on HP, Dell and Apple, and the corresponding shares were all down about 4-5% on the news. In other words, as I argued last night they expect the entire industry to be hurt, rather than just the high cost producers.

Of course, the 15% is just an aggregate figure. Some people will buy at the same price point they bought last time, while others will drastically shift their demand. And some won’t be buying at all: an 11% fall in unit sales is equivalent to a 2 year replacement cycle being stretched out by 3 months (or 25% of the market delaying by a year).

Note: I couldn't verify if anyone refers to Michael S. Dell as “Mike.” I’m guessing if you’re worth $15+ billion, your inner circle is pretty closely guarded.

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