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Business expenditures for computers, computer peripherals, and other fixed investments are expected to increase almost 8% in 1997, even though the industry has not shared in the US economic expansion for the year. Capital goods spending by business is forecast to grow at least 5%-per-year through the early 21st Century, and computer-related demand will increase. These stocks will outpace the market in 1997 and 1998, and well into the future.

Computer industry and computer peripherals industry securities have all the appearances of being a good investment, not only for 1996 but for the next 3 to 5 years, but investors must be wary that volatile prices can affect corporate earnings and that much of both industries' success will be based on economic conditions throughout the world. If the international economies continue to grow, a drop in the industries prices could easily be offset by increased demand and sales that would increase profits despite price cuts.

Computer markets in Europe and the US are not expected to grow until the 4th qtr of 1996, although the US economy is growing at an annual rate of 2.5% to 3% in 1996. However, strong demand for servers, among other factors, will allow the computer and peripherals industry to achieve good 1996 earnings. Stocks in the computer industry underperformed the market in 1996, but investors will find many with good price potential for 1999-2001.

The outlook for mainframe computers is good, for personal computers (PC) not so good. Businesses are using networks more often to tie together PCs and share peripherals rather than buy new PCs. PCs are still selling well and overall the industry is expected to do well in 1997. Japanese manufacturers, with a foothold in the portable market, are making inroads in the desktop market and will create narrower markets for US manufacturers. Analysts are cautious in their support of this group.

The computer industry as a whole did very well in 1994, with sales of personal computers leading the way. Earnings growth is expected to continue into 1995, and even to the end of the decade for some companies. Sales to the home market were particularly high in 1994, although sales momentum is expected to taper off as the market becomes saturated. The industry is ranked second out of 96 for timeliness, and many of the group's shares are expected to outperform the rest of the industry during 1995. Caution is advised for conservative investors, however, due to the industry's historic volatility.

The computer and peripherals industry is expected to continue growing through 2000. There is expected to be some slowing of growth over the near term due to rising interest rates in the US and economic downturns in Japan and Europe. Competition in the industry is intense, which should dampen strong gains. However, demand for computer equipment remains strong, and the client-server computing sector continues to be a business trend.

The computer and peripherals industry is expected to experience improved growth during the Oct-Dec 1994 period and in 1995. The industry is experiencing its regular summer sales slump, and some analysts predict the weak market will continue. However, personal and mainframe computer demand is expected to improve with the end of the summer sales season, which should drive the predicted improvements in the computer and peripherals industry.

Computer and peripherals industry stocks are better poised for long-term than for near-term growth. Long-term growth should be helped by company restructurings to reduce operating costs. Durable equipment spending is forecast to rise 12% in 1994, 9% in 1995, and 7-8% in 1996 and 1997. However, only a few companies will surpass market averages in 1994. Potential investors should also note the volatility of these stocks.

The computer and peripherals industry should see double-digit gains again in 1994, powered by users' increasing demand for smaller, faster computers and assisted by the industry's seemingly unceasing trend toward obsolescence. Domestic sales should improve but overseas deliveries should continue to falter, given the recessions in both Japan and Europe. Increased competition among producers has made it harder to maintain market share, especially amid price wars and consolidation. Investors should not expect these stocks to greatly out-perform the market.

The computer and peripherals industry is expected to benefit from the current domestic economic recovery. Pressure on profit margins from overcapacity and intense competition, however, is expected continue for the short term. This industry group is not considered timely and is expected to perform poorly during 1994. Computer and peripheral companies are expected to experience sharply increased earnings performances from 1996 to 1998.

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