Merrill Lynch offered yet another dim sales outlook, lowering 2001 PC unit growth to 12.5 percent from 15.4 percent and sticking to its 12.8 percent growth forecast for 2002. The revision follows a trip to about a dozen PC hardware suppliers in Taiwan, including component manufacturers, motherboard makers, notebook manufacturers and foundries. In a Tuesday research note, Merrill Lynch analyst Steven Fortuna said the companies supply Apple Computer, Compaq Computer, Dell Computer and Gateway, among others, "which makes them a leading indicator of things to come in the industry". About 75 percent of the world's motherboards and about 50 percent of all notebooks are made in Taiwan. "First-quarter revenue for the companies we visited looks as if it will decline substantially on a sequential basis," Fortuna said. Although this is not an unusual pattern, "there had been the hope that the especially weak December quarter would provide an easy sequential comparison for the March quarter," he added. Fortuna remained guarded about the second quarter, typically the slowest of the year, but said, "Most of the companies that we visited were more optimistic about demand from their customers in the second half of the year." Merrill Lynch expects 7.5 percent year-over-year growth in the United States and 8.5 percent growth in Europe. Japan and Asia could reach double-digit growth in the low 20 percent range. "While the first half of the year doesn't look promising for either corporate or consumer, we think it is more likely that any economic-related bounce in the second half would come on the corporate side," Fortuna said. He showed less enthusiasm about the consumer market, where Apple and Gateway are heavily dependent. "Even if consumer did bounce late in the year, we have concerns over pricing and the potential cannibalistic impact of competing Web-access platforms," Fortuna said. Despite the glum outlook, Windows 2000 upgrades could spur sales later in the year, as well as increased demand from small businesses. "Only one in five small businesses in the US are Web-enabled today," Fortuna noted. The US computer market ground to a halt during the fourth quarter, as consumers passed over PCs for handhelds, peripherals and other gadgets. IDC put US PC growth in the fourth quarter at 0.3 percent year over year, down 3.6 percent from a quarter earlier. The slowdown contributed to fourth-quarter losses from Apple and Gateway. Dell and Hewlett-Packard, which reveal quarterly earnings results within the next two weeks, issued profit warnings because of the PC sales slump. For complete business coverage, see ZDNet UK's Enterprise Channel. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet news forums. Let the editors know what you think in the Mailroom. And read other letters.