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PC sales in Europe take a beating

Unlike past downturns, when corporate sales pulled the personal computer market out of its doldrums, retail sales may have to do the trick this time.

Retail sales of PCs in the United Kingdom and France were the bright spot in an otherwise dismal fourth quarter for Western Europe.

The amount of personal computers sold in Western Europe declined by 11 percent year over year in the fourth quarter of 2001. But while the overall market contracted, retail outlets had better luck.

The number of computers sold at retail stores rose 9 percent in the United Kingdom and 2 percent in France, according to a report released by Context, a London-based firm that tracks the PC market in Europe.

Germany's PC picture wasn't as rosy. Retail sales in that country fell by 22 percent in the same period. Total sales of PCs in Germany declined even further--by 34 percent.

The United Kingdom posted a 2 percent gain in total unit sales of PCs in the fourth quarter over the same quarter last year, while France's unit sales declined 13 percent year over year.

Germany's lackluster market pulled down Western Europe's total retail PC sales, which declined by 10 percent year over year in the fourth quarter, according to Context.

On an up note for Western Europe's PC scene, fourth-quarter sales did not decline as much as they did in previous quarters. The fourth-quarter retail resurgence in 2001 was driven mainly by small businesses, said Jeremy Davies, an analyst with Context.

These tiny shops, usually with fewer than 100 employees, often fly under the radar of large PC makers. But they buy at least one or two PCs a year from retailers.

"Retail seems to have all of a sudden picked up," Davies said. "The vast majority of small businesses are looking for the best price, and the best price is at the retail outlet."

However, Dell Computer, which sells direct to customers, has also been marketing to small businesses in Europe--with good results, he said.

"This quarter indicates that something has changed," Davies said. "Is it the inflection point? It's too soon to tell, but this is not a flash in the pan."

Unlike past downturns, when corporate sales pulled the European PC market out of the doldrums, retail sales may have to do the trick this time.

The corporate market for Western Europe didn't do as well in 2001; it declined 21 percent year over year in the fourth quarter. And Context predicts that corporations will do little to replace existing PCs until later in the second half of next year.

For overall PC sales in the region, Context forecasts unit sales to be flat or up very slightly in the first half of the year. For the second half of the year, the company predicts a return to greater growth due to consumer demand--which perks up during that time of year--and to corporations that will begin to replace older PC hardware.

"We'll start to see the beginnings of a return to normal replacement cycles," Davies said, referring to the second half of the year.

Europe's sliding unit sales mirror the worldwide PC market's 2001 tale of woe. The worldwide PC market fell about 5 percent to around 128 million units, according to market researcher Gartner.