Niles joined Lehman this year and covers computer hardware and semiconductors. Prior to that he worked at Robertson Stephens for 10 years and before that was an engineer at Digital Equipment . By firm Best stock pickers Best firms Despite sluggish PC demand over the past year, Niles is seeing signs of an improvement. He explains that Y2K compliance issues pulled PC demand that would have traditionally appeared in the third and fourth quarters of 1999 into the first and second quarters of that year. In addition, Windows 2000 was launched in February of this year and he believes corporations are taking time to evaluate it, delaying purchasing until they're ready to deploy it.
Niles also cites PC pricing being minimally down and stabilizing as an additional factor.
Consumers want to be able to download and use programs with sophisticated graphics, video and sound, all of which demand a powerful computer, and many cheap and free PCs don't fit the bill. By the fourth quarter he predicts an increase in demand in both the consumer and corporate markets, the latter being fueled more by Windows 2000 ramping up. Niles tends to favor companies that have large corporate exposure because he sees this product cycle as being more driven by companies than consumers. If they get their Web-hosting spun out successfully and business keeps improving, MUEI could be a sleeper. The combination of a number of other factors, too, like the potential for tremendous multiple expansion, combined with rebuilding credibility, combined with the potential to really significantly beat estimates makes that my best pick between now and year-end.