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U.S. PC Makers have Tough Q2


Most computer makers had a tougher-than-expected second quarter, with weakness in Europe and sluggish overall demand hurting results, and investors will closely watch reports from IBM and Compaq next week.

So far this quarter has been tumultuous, with an upside surprise from Apple Computer Inc of narrowed losses and an unexpected warning of slowing orders from blue chip Hewlett-Packard Co roiling technology stocks.

Compaq Computer Corp will report on Wednesday and International Business Machines Corp is due Thursday.

Intel Corp surprised Wall Street with an 18 percent jump in second quarter earnings, better than expectations, driving a mini-rally in technology stocks.

But analysts said that Apple is an anomaly in the throes of a major cost-cutting plan and microprocessor maker Intel benefits from the declines in PC prices -- which hurts the profit margins of computer makers -- as more PCs are sold.

All eyes will be on Compaq Computer for indications of PC growth and on IBM for a view of overall economic health of the industry. Monday, the much-anticipated results from software giant Microsoft Corp will also indicate PC demand.

"It's really the demand situation that is the concern, rather than how companies are squeezing out profits," said David Takata, a Gruntal & Co analyst. He said so far, a lack of forecasts about the second half is also increasing jitters.

IBM, like many of the big system makers, is undergoing product transitions in a few of its businesses. The computer giant is also being hit by fluctuations in currency, because a large portion of its revenue comes from outside the U.S.

The stronger dollar overseas has hurt companies like IBM and Digital Equipment Corp.


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