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Europe: PC sales see slight growth

Preliminary first-quarter data for Europe reveals 7 percent growth in PC shipments compared with the same quarter last year, according to market researcher Context.

Long considered a laggard in PC sales, Europe is emerging as one of the bright spots this spring, if for no other reason than that U.S. performance is so bad.

Preliminary first-quarter data for Europe revealed 7 percent growth in PC shipments compared with the same quarter last year, according to market researcher Context. By contrast, market researcher Dataquest on Thursday put growth in U.S. shipments down 3.5 percent compared with a year earlier.

"I think we are surprisingly unaffected by what's happening in the States," Context analyst Jeremy Davies said from the London office. "The fundamental economy in Europe is not bad. Whatever slowdown there is is going to be panic reaction because people are looking too closely at the U.S."

How well the European market did is a matter of perspective. Seven percent growth would have been disappointing last year. Now, it's reassuring.

Although optimistic, Davies emphasized that "no one is in a position to make any long-term calls in this marketplace." Like the United States, where market saturation has hurt PC sales, Davies said the days of double-digit growth are over in Europe.

Other market researchers expect the same or slightly worse when final sales figures for Europe come in. IDC expects European PC sales to be in "the high single digits" for the first quarter, analyst Roger Kay said. Dataquest analysts are somewhat more cautious.

"Early indicators for the European PC market suggest the first quarter will return to moderate single digit growth," the company said Thursday. "The consumer slowdown that affected Europe during the fourth quarter of 2000 continued into the first months of 2001, and a flat performance is expected in this segment."

Views on European sales depend on one's point of view. Chipmaker Intel, for instance, said European sales have been slower than normal. But Intel's figures

European PC sales
Market share among major PC makers:
Company 1Q 2001 (%) 1Q 2000 (%)
Compaq 13.1 14.8
Dell 10.6 8.7
Hewlett-Packard 9.3 7.4
Fujitsu Siemens 9.2 11.2
IBM 6.1 6.5
Source: Context
reflect excess inventory. PC makers mostly incorporated a lot of parts they already paid for in the fourth quarter.

Context's preliminary data doesn't support Intel's view, Davies said, but its final figures could. The market researcher's preliminary data comes from what companies say they shipped, which it later contrasts with what dealers and retailers actually sold.

"Then we'll see who stuffed the channel," Davies quipped. Channel stuffing is industry lingo for shipping too much product to dealers, which must sell it off before taking more goods.

Dataquest now predicts slower growth than previously expected in many Western European countries. "In terms of country performance, France, Germany and the U.K. all show modest growth, mainly due to the pickup in the professional market," the company said.

Context, like Dataquest, reported continued slowing in consumer PC sales.

"Like the States, consumer PC sales are not too hot at all, business desktops are a bit better, and handhelds and portables are doing great," Davies said. In fact, preliminary figures show that sales of mobile products grew 30 percent in Europe during the first quarter. Server sales soared, up more than 80 percent year over year.

IDC reported similar trends, Kay said. The consumer market "behaved even worse than expected, while commercial was much better," he noted.

Sizing up the big gainers
Although Dell Computer knocked Compaq Computer out of the top spot worldwide, the Houston-based PC maker is expected to remain No. 1 in Europe, according to Context.

Davies said "expected" because Compaq is the one company that did not provide final PC shipment figures. Compaq won't release those until after announcing first-quarter earnings Monday.

Preliminary data shows that Compaq's market share fell to 13.1 percent in the first quarter, compared with 14.8 percent a year earlier. Context anticipates flat growth year over year for Compaq. Dell moved up to second from third place, with 10.6 percent market share compared with 8.7 percent a year earlier. Context expects Dell to show 34.3 percent growth year over year.

Davies said Hewlett-Packard posted the most interesting results because they contrasted sharply with statements the company's CEO made earlier this week. On Wednesday, HP issued a profit warning, in part blaming European sales.

"At this time, it is quite clear that the U.S. downturn in the consumer market is now spreading to other regions, notably Europe," HP chief executive Carly Fiorina said of the company's sales woes.

Davies disagreed. "They're going gangbusters over here," Davies said. "We're showing HP with a massive 39 percent gain in unit shipments, and this is on top of a 34 percent gain they had the same quarter last year."

HP in fact gained market share--up to 9.3 percent from 7.4 percent a year ago--and moved into third place in the rankings.

"What we can't understand is why HP's CEO is singling out Europe in what she says about HP's problems. We don't see them."

Fujitsu Siemens dropped from second to fourth place, with 9.2 percent market share compared with 11.2 percent in the year-ago quarter. The company posted negative 8.7 percent growth.

IBM rounded out the top five, with its market share down slightly to 6.1 percent from 6.5 percent. Context expects IBM to show 2.4 percent growth.

Other companies not making the top five also showed interesting results. While Sony's European sales grew by 50 percent, the company faces a stiff challenger.

"We're seeing Acer coming on strong and doing battle with Sony in the retail sector strongly," Davies said. Acer is expanding from its No. 1 position in Italy into other countries, he added.

NEC and Toshiba both saw massive growth declines, down 15.4 percent and 14.5 percent, respectively.

Apple Computer suffered even more, with sales down 26 percent--or 75,000 units--from a year earlier. Still, the company held onto its eighth-place ranking.

Overall, the most important change for the quarter came not from sales but how numbers are counted, Davies said. In January and February, Dell asked Context, Dataquest and IDC to revise its European numbers going back a year. The Round Rock, Texas-based company claimed that because its fiscal quarter is out of sync with analysts' calendar accounting, it had overestimated sales for four quarters.

But that restatement, which reduced Dell's market share in the past, made current comparisons more favorable, increasing growth.

"The figures from Dell include the restatement," said Davies, which he noted gave Dell a slight growth boost for the quarter.

"Now all our Dell numbers are calendar based, so we're comparing apples to apples now," he added. "It's a very big deal."