Still, Gartner believes that it is premature to say that the market is recovering.  “Professional shipments” have continued to struggle and the growth in consumer units appears to be due to vendors and restocking inventories rather than an increase in demand.

For Q2 2009 and Q3 2009, the declines are expected to be around 10% year over year.  It is not until the Q4 2009 period that a return to growth is expected, so if the “less-bad” notion starts to go back into a much quicker double-dip in the recession levels then it is not hard at all to imagine that the expected return to growth could be put off to a further date.  But what we find interesting here is that the Q4 period for growth coincides exactly with the expected late-October launch of Windows 7 by Microsoft Corp. (NASDAQ: MSFT).

We have been watching how the”netbook” craze has kept unit sales from falling off the cliff much worse.  Ditto for the sub-$500 PC sales.  This is something we continue expect for some obvious reasons and some not-so-obvious reasons, even as the economy climbs out of the gutter.

Gartner called these netbooks the ‘Mini-notebooks’ and said the units remain on track to reach 21 million this year and 30 million next year.  The report also noted that mini-notebook units posted the first quarterly decline on a sequential basis in Q1-2009.

Mobile PC units should hit roughly 149 million units in 2009, a 4.1% gain over 2008.  The issue is that our fears about lower ASP’s, average selling prices, is still heading south.  Very south.  Gartner’s expectation is a decline of 12.8% in mobile PCs. This is a ‘ditto’ for Gartner’s expected desktop PC units coming in at an expected 125 million.  That desktop figure represents a drop of 15.7% over 2008.  And as for ASP’s there, Gartner put that figure at an expected decline of 26.6%.

Much of the  expected growth is from replacements.  The economy got in the way of many replacements and upgrades.  Gartner expects this to grow strongly in 2010 and 2011.  While we noted that the recovery for Q4 coincides with the Windows 7 launch, Gartner expects the launch to have only a very modest impact and it does not expect the market to significantly deviate from its normal seasonal trends just because of Windows 7.  Gartner even believes that the professional segment will delay the adoption of Windows 7 for at least a year as developers test and adjust the network applications.

As you can tell by the tone, this is not an all-good report.  But it is also not an all-bad report.  If the PC sector can boost those units then the hope will be that the sales of peripherals will benefit as well.  That may or may not be the case as most PC users can use the peripherals they already own.

Apple has been bringing its price-points down, but it still has a significant issue ahead.  Its ASP’s are much higher even with its new product launches.  The iPhone is becoming a ultra-mobile device in and of its own.  But for a desktop or even for a netbook, it is still a premium product.  The return of demand into Q4 and into 2010 is something we still believe ourselves that will be a price-oriented return of demand.  The army of unemployed is currently just under 7 million on an official basis.  The army of unemployed paired up with the underemployed and those working on contract or part-time rather than full-time is roughly twice that amount.  This may keep new buyer from paying too far up whether they choose an Apple or a Windows 7 PC.  You can still get into a Mac Mini for $599.00, but you won’t look as cool without the Apple monitors and peripherals.

Guess where Intel is headed with its new Nokia pact and its embedded systems integration acquisition of Wind River?  Yep, smaller and smaller PC’s and embedded processors and systems for much smaller computing devices (and non-PC applications for industries and other consumer devices).

This ASP decline at the same percentage rates cannot continue forever, but the PC has been in the process of becoming a utility device for some time.  The good news here is that 2009 may not be quite as weak for the PC sector.  And 2010 may be the year we return to growth.

Jon C. Ogg
June 25, 2009

It looks like someone made a rather large bet that U.S. Steel (NYSE: X) was going to take another big leg down after reviewing options trading.

It seems that Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) may be back doing some light options activity in Burlington Northern Santa Fe (NYSE: BNI).

Northfield Laboratories Inc. (NASDAQ: NFLD) is just about to go bye-bye.  Even the Chairman sold his last shares.

On the Intel Corp. (NASDAQ: INTC) buyout of Wind River Systems (NASDAQ: WIND), it seems some are already looking for a way to make Intel pay more.

Doug has a pretty worthy take here on Apple Inc. (NASDAQ: AAPL) and the challenges faced upon the return of Steve Jobs.  But what is interesting is that Apple stock closed up only 0.65% at $144.67 on the news.  Maybe a 60%-plus run since the Jobs news discounts Steve Jobs.

Palm Inc. (NASDAQ: PALM) was right.  Its Pre smartphone was a hit as the stores sold out of this rather fast, but shipments were very small.  Now, the question is if a SELL THE NEWS mentality takes hold since shares have run-up so much.

The swine flu, or H1N1, still has trades tied to it, despite this being a late season and pre-summer outbreak that came with a much smaller toll and weaker move than the plain Jane flu.  A company called Novavax, Inc. (NASDAQ: NVAX) signed a cooperation agreement to NIH to agree to evaluate a virus-like particle vaccine candidate against the H1N1 virus, and the company said it has completed initial steps towards producing an H1N1 VLP vaccine for animal and human testing.  This created a move well north of 50% as the stock rallied from $1.87 to $3.26 on Thursday, but then on Friday it gave back almost half of those gains and shares closed down at $2.60 for the week.

Unless there are several guidance surprises coming, there are very few key earnings due out this coming week that are likely to guide the markets on their own.

-The 24/7 Wall Street Team

During the trading session Friday, a firm called Finkelstein Thompson LLP announced that it was investigating the company as the offer for Wind River of $11.50 per share appears to be “opportunistically timed to take advantage of the current economic downturn.”

After the close came an announcement from Levi & Korsinsky, LLP that it is also investigating “Breach of Fiduciary Duty” by the Board of Wind River Systems.  It noted how shares were higher just in August 2008.

Our take here is that Intel is perhaps the biggest and most natural predator in this case.  But we also think at least three other companies could make the Wind River business for embedded systems much larger than Wind River could on its own, and there are probably ten potential merger partners that would be second-tier buyers.

You have heard of the game called “chicken” before.  It gets played in the world of Wall Street mergers also.

Jon C. Ogg

If you recall, Jim Cramer touted this stock back in early 2008 as a would-be or should-be takeover candidate.  Shares were at $8.15 then, and looking back from today its 52-week trading range is $5.61 to $12.99.  This stock has actually been public since the mid-1990′s.

Embedded systems and mobile devices are essentially new growth avenues for Intel. This includes a further and more solid move into smartphones, mobile Internet devices, other consumer electronics, auto  “info-tainment” systems and other automotive areas, networking equipment, aerospace and defense, energy, and technically into thousands of other devices. Embedded systems is a multi-billion dollar market opportunity and this will give Intel a leg up into this move.  Selling processors in a world where a huge portion is heading into sub-$500 PC’s creates the need for this acquisition.

Wind River’s board of directors has unanimously approved the transaction and the merger should close this summer.  The company has over 1,600 employees and operations in more than 15 countries. The company’s revenues for its most recent fiscal year were $359.7 million.  With the future of smaller and smaller electronics devices and with Intel behind this, the Wind River unit could start getting revenues into the “billion” hurdle rather than the hundreds of millions.

This comes at a substantial premium.  Shares closed at $8.00 yesterday, and shares are up 45% pre-market at $11.60.
The list of companies which could be possible competing buyers are probably too many to note, but Microsoft Corp. (NASDAQ: MSFT) is sort of a loose candidate, but IBM (NYSE: IBM) and Texas Instruments (NYSE: TXN) immediately come to mind as being able to easily integrate this company.  There are probably another dozen companies which could do this integration as well, but having the processor lead here does make Intel the easiest integrator by our read.

A bidding war might not be in the making here if Wind River has unanimously accepted the buyout offer.  This company would make a substantial unit for any large technology behemoth wanting to expand their moves into or deeper into embedded systems.  Technically, there are many giant technology players that could step into the fray here if they wanted to.  The question is if another company wants to outbid a company that can keep offering more and more if it needs to.  Intel has billions in capital it can tap.

Jon C. Ogg
June 4, 2009

This week Cramer has made several value calls on oversold technology companies that will still do well in the current environment.   On Monday, Cramer picked EMC Corp (EMC) for its intrinsic value of sub-$5.00 and this is one where we noted that great value manager Whitney Tilson was discussing with "THE EMC STUB" with the explanation for the trade; on Tuesday, Cramer picked Riverbed Tech (RVBD) for network optimization and he’s been on this stock before; and last night Cramer talked up ADC Telecom (ADCT) with a $1 down $7 up call that he’s liked for some time.

Wind River shares closed down 2.6% at $8.15 today, but this rose 5.5% to $8.60 in after-hours. 

Jon C. Ogg
January 17, 2008