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Wednesday, August 1, 2012

Software and Hardware Giants Face China Crisis

The industry observers expect bad results next week: even Intel is expected to report bad sales growth, because China’s slowing economy definitely shows falling demand for personal computers.

Indeed, the analysts are expecting to hear sad stories from the giants when they report their results. Undoubtedly, Microsoft and Intel will have sinking profits, but they will have to report the rise of the sales for around 5% from a previous year.

According to Bloomberg, the growth has been slowing in the world’s biggest computer market since 2011, which revealed that electronics makers can’t count on Asia to counterbalance falling demand in Europe and the United States. Too bad for Intel.

The situation has already hurt AMD that announced its revenue fell 11% in the second quarter because of weaknesses in China and Europe. Other doom was clearer after Applied Materials, the hardware giant’s major supplier, cut its annual targets a few days ago, citing delayed orders for its chipmaking equipment due to weaker end-market demand for semiconductors in those regions.

China showed its weakest expansion in 3 years in the second quarter, while its economy improved by 7.6% from a previous year. Ironically enough, one of the reasons is because the Chinese are dependant on orders of American and European tech companies. And since American and European sales fall, so do the orders into the outsourced plants in China.

Another problem Intel faces is that the analysts warn the consumers and the companies are pulling back on spending in result. The manufacturer knows that if it also talks about a technology meltdown it will just make matters worse. That’s why it’s expected to be upbeat when it announces the results of the growth.

In the meantime, Microsoft is also suffering and missing its targets while the Windows group is missing the experts’ estimates in 4 of the 6 quarters. Media reports claim that it is thanks to customers shifting to devices like tablets which don’t run the OS, but in reality it is more likely thanks to people hanging on to computers longer having been put off by a lackluster economic recovery in the United States and concerns about the debt crisis in EU.

It isn’t helped by the fact that consumers are putting off buying a computer until after Windows 8 is released. Anyway, the current results are not so good for technology companies.

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