Cut 2009 regular notebook (NB) PC unit
growth forecast to 11% from 17% y-o-y,
lower than IDC’s 23%
􀀗 NB demand is weakening. Only low cost
netbook components see no order cut
􀀗 Downgrade Asustek, Acer, Lenovo, and
Wistron to Neutral
Worst case only 3.2% PC unit growth in 2009
Based on HSBC’s recently revised global GDP forecast, we
lower our PC growth forecast, with the worst case scenario of
only 3.2% global PC growth in 2009. The slow growth is
similar to the situation in 2001/2002 when PC unit shipments
declined 3%. While US weakness is well known, we believe
NB sales in Europe will soon see pull-back given the
depreciating Euro, which will be most negative for suppliers
with high exposure to Europe, like Asustek and Acer.
10% Netbook cannibalization to lead to 12%
PC ASP decline
Netbooks deliver both low price and portability, accelerating
the trend of notebooks replacing desktop PCs and enlarging
the ultra portable NB market and extending it into the
telecom channel. But they also increase pricing pressure on
the whole supply chain. For Asustek and Acer, which have
limited desktop PC exposure, netbooks help them to gain
market share, at the price of less profit growth. For NB
ODMs, netbooks offer only downside protection (unit
growth), but not earnings upside.
Acer/Asustek face greater risks than ODMs
Compared to ODMs, Acer and Asustek face greater
geographic, product mix and valuation risks (discussed
inside). However, we are not comfortable rating the two
stocks as Underweight due to their market share gain story
and sound financials.