PC market 'weak for six months'

HP's Carly Fiorina: "It's clear there's been a significant change in market conditions"

Computer giants Hewlett-Packard and Gateway poured gloom on a revival in technology stocks on Thursday by issuing disappointing profits statements.

Hewlett-Packard warned that earnings for the current fiscal quarter would fall about 10% short of expectations, blaming a tough economic environment and weak demand.

And Gateway, the world's second biggest seller of personal computers, in an announcement a week ahead of schedule, revealed profits of about one third the level analysts had expected.

The firm predicted sales growth of just 3% this year, prompting it to announce a 10% cut in its workforce.

Slump in PC sales

Both announcements came after the close of trade on US stock markets on Thursday, when the tech-heavy Nasdaq index had posted a gain of 4.6% in its third consecutive winning session.

Gateway's Jeff Weitzen: "Outlook grim for six months"

The warnings also follow the prediction by internet portal Yahoo on Wednesday that trading could be tough this year, and a string of profits downgrades in recent months by firms, including Dell, Apple and Intel, linked to the PC market.

Carly Fiorina, chief executive at Hewlett-Packard, said: "It's clear there's been a significant change in market conditions in recent weeks.

"Consumer spending in the US has been below even our own conservative estimates and... customers - responding to the growing economic uncertainty - have become increasingly cautious about IT spending."

Analyst John Jones, of Salomon Smith Barney, said: "I think we are going to find that the competitive nature of the PC industry and the lack of consumer demand is what's putting pressure on them [Hewlett-Packard]."

'Agressive pricing'

Gateway, which blamed weak Christmas trade for much of the firm's underperformance, said the PC market would recover in the second half of 2001.

Chief executive Jeff Weitzen said: "We had expected some continued ramping of demand in December... but that did not materialize.

"Softer sales have caused inventories of our competitors to swell, and have touched off an aggressive pricing environment that will have negative consequences for the PC sector for the next six months."