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Compaq, Apple, Gateway stronger in Asia

U.S. computer makers are starting to see sales rise in Asia, perhaps a good sign for the region's struggling economy.

U.S. computer makers are starting to see sales rise in Asia, a harbinger of improvement for those struggling with the important region's tepid economy.

Gateway, Sun Microsystems, Compaq Computer, and Apple Computer are among the prominent companies reporting a strong uptick in shipments to Asia.

The upswing stems from a variety of factors, including seasonal strength, economic mending in markets such as Japan, and lower PC prices, according to analysts and executives. Some of the sales growth can also be attributed to the fact that the first quarter of 1998 was exceptionally dismal for computer makers.

"The end of the Japanese fiscal year, combined with continued high consumer demand, all showed signs that the region is rebounding from last year's troubles," International Data Corporation (IDC) said in a recent report.

"Currency stabilization and low price points drove strong demand in Asia-Pacific [in the first quarter]," the report added. "Markets in Asia-Pacific continue to heat up and reverse the negative growth pattern that marked much of 1998. Consumer thirst for new PCs as well as the close of the fiscal year combined to lift the Japan PC market to high growth."

Gateway last week reported that PC shipments jumped 42 percent during the first quarter of 1999, a number aided by a 96 percent growth rate in Asia. By comparison, worldwide computer sales as a whole grew at about 15 percent.

Compaq has been citing similarly positive developments in Asia--even as it talked of weak U.S. corporate demand.

Revenues for Compaq's Asia-Pacific region grew more than 20 percent in the first quarter of this year over the same period in 1998 and 8 percent over the previous quarter, said Paul Chan, vice president and managing director of Compaq Computer Asia, speaking to Reuters last week. By contrast, Compaq's overall sales in the first quarter were up 66 percent over the first quarter of last year, but down 13 percent sequentially.

"It's indicative of the recovery of the economy across the broad segments in Asian countries," Chan told Reuters.

Large-scale computer bellwether Sun has also indicated that Asia is on the mend. Chief executive Scott McNealy described the Asian market as "rebounding" in a conference call after reporting earnings earlier this month. Chief financial officer Mike Lehman said Japanese revenues were up 35 percent compared to the same quarter last year.

Sun said revenue increases were strongest in Japan, but also good in Singapore, Australia, and Taiwan.

Apple is feeling better about Asia's single biggest market, Japan. Chief financial officer Fred Anderson said that Apple's desktop market share in Japan more than doubled year-ago numbers, climbing over 18 percent, thanks to iMac sales. In terms of units shipped, growth was 52 percent in Japan, which has traditionally been a strong market for Apple.

Apple executives also said that the company is increasing its customer base by bringing more first-time computer buyers into the fold. Anderson cited figures showing that 32 percent of second-quarter iMac sales were to first-time buyers, and 11 percent were "converts" from Windows-based machines. In Japan, the number of first-time buyers reached 46 percent.

IBM Asia posted 13 percent constant currency growth. "With IBM the largest U.S.-based PC vendor in Japan, we would suspect that PCs sales were also a positive factor in the region," said Laura Conigliaro of Goldman Sachs.

IBM Japan, a virtual computer powerhouse unto itself, is one of the top three Japanese computer makers and tends to experience a bigger upside when Japanese and other Asian markets improve.

The trend bodes well for the future, according to IDC.

"If market conditions in China, India and Australia remain healthy, the regional PC market should generate solid gains in 1999, producing the highest annual shipment total to date for the regional market," said Kitty Fok, Research Manager at IDC Asia/Pacific, commenting on the rebound in fourth-quarter 1998 shipments.

After a moribund three quarters last year, in the fourth quarter of 1998 PC shipments in Asia/Pacific signaled "a rebound in many regional markets as shipments increased annually for the first time in 1998. Total regional PC shipments amounted to 2.89 million units...which is the highest total ever for the regional PC market."

Japan, the second-largest computer market in the world, is showing some of the most encouraging signs. For example, sales of PCs at about 20,000 retail stores in Japan have been increasing steadily over the year-earlier period and in the last week of March were up more than 60 percent over the same period in the previous year, according to a report in AsiaBizTech.

Sales of notebook computers have also been rising in the region. Indeed, much like Japan, China is also showing a ravenous appetite for portable computers. Imports of notebook PCs from Japan, the United States, and Taiwan were valued at about $52 million in 1998, a big increase over 1997, according to another report in AsisBizTech.

But analysts are still cautious on some fronts. "Yes, we're starting to see a soft recovery but nothing dramatic," said Ashok Kumar, an analyst at US Bancorp Piper Jaffray. For example, he cites the Japanese government market as being strong but says the commercial market is still weak.