Desperate Vendors Overbuild PCs for Windows 7?

Eric Savitz on Barron's Tech Trader Daily noted that AMD's earnings report pointed to lower than usual Q4 revenues because of "the big build we've seen of PCs in anticipation of the Win 7 launch." In other words, it may be that vendors are creating inventory the way that politicians generate pork, and that's a bad sign.

Call it irrational exuberance or stupidity, vendors have been feeling economically down and, as happens with human beings, are anxious to let the good times roll. You can see it in how the trade press greets even the slightest hint at good news. The problem is that the worst days probably aren't over, even if Google CEO Eric Schmidt wants you to think so.

However, it seems that vendors want to believe, like some take off on the X Files. The problem is that to show their orthodoxy, they may be stockpiling inventory, which ultimately will reduce their profitability. Then you get into the feast or famine routine that too often rocks tech. There will be too many machines, so everyone will start discounting in hopes of getting inventory to move. Consumers will take predatory advantage of the missteps and buy cheap, reducing revenue and profit even further. Then the slowdown backs up into all the parts companies and everything starts grinding to a halt, doing a good imitation of the NAND memory market, possibly with some vendors even going out of business.

Unfortunately, there's not much that can be done other than sitting tight and remaining conservative in business. Just because everyone else has shed their rain gear doesn't mean you should leave the umbrella at home when the skies are gray.

Image via stock.xchng user daddypete , site standard license.