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November 5, 1999
Compaq's European Turf Erodes;
Dell, Fujitsu, Siemens Gain Ground
By DAVID PRINGLE
Staff Reporter of THE WALL STREET JOURNAL
Compaq Computer Corp. is seeing its lead in the highly competitive European personal-computer market eroded by a resurgent Dell Computer Corp. and newcomer Fujitsu Siemens Computers, the latest market figures show.
Compaq's PC sales in Europe fell 10% by value in the third quarter of 1999, compared with a 1% decline in the total market to $9.2 billion (8.78 billion euros), according to figures released Thursday by market research firm Dataquest, which is owned by the Gartner Group. By contrast, Dell's European PC sales leapt 16% in the same period.
"Compaq is under pressure in all the European markets," said Howard Seabrook, vice president and service director of Dataquest. "The consumer side of their business is performing relatively well, but the problems come in the desktops," or corporate PCs, he added.
Compaq is still heavily reliant on sales to large companies, many of which are freezing computer spending while they prepare for the so-called Year 2000 computer bug, according to Mr. Seabrook. Dell, on the other hand, is strong in the still-healthy small and medium-size business market.
"Anecdotes from resellers also suggest that Compaq wasn't being very nimble in counter-bidding against Dell for what corporate business was out there," Mr. Seabrook said. Although there are signs that Compaq was beginning to recover toward the end of the quarter and Dataquest's figures show that Compaq still has 16% of the European market by value, compared with 11% for Dell. Neither company was available for comment.
Good News for Venture
Dell also outshone Compaq in the European portable-PC market, where it recorded an 85% increase in unit sales, compared with 13% for Compaq and 18% for the market leader Toshiba Corp.
The latest figures contain good news for Fujitsu Siemens Computers, the joint venture between Fujitsu Ltd. and Siemens AG that came into being on Oct. 1. Fujitsu gained more than a percentage point of market-share value in the third quarter, while Siemens gained 0.2%. The joint venture now has more than 12% of the European market by value -- placing it ahead of Dell and second only to Compaq.
"Both Fujitsu and Siemens have had a tremendous drive for growth in the run up to the joint-venture," Mr. Seabrook said. Both companies are also strong in the German market, which performed particularly well in the third quarter, Dataquest's figures show. Aggressive price competition and a recovering economy, helped total unit sales in Germany to rise 35% to almost 1.6 million for the quarter.
International Business Machines Corp. also saw its market share by value rise marginally. An IBM spokesman said that the company had enjoyed particularly good sales of portable PCs.
The decline in the value of the total market occurred despite a 24% increase in the number of units shipped from the year-earlier period, suggesting that the PC market is still racked by ferocious price competition. More than 6.7 million units were sold to businesses and consumers in Europe between July 1 and Sept. 30.
Fierce Competition
"PC manufacturers know only one way to compete: by relentlessly lowering prices to take advantage of falling component costs," Mr. Seabrook said. "The challenge facing manufacturers is can they put enough extra value into their machines to at least hold prices steady."
Mr. Seabrook predicts further consolidation in the PC market, adding that he expects at least one manufacturer, hurt, will withdraw in the near future.
Price competition helped to fuel particularly strong sales to consumers in Spain, France, Germany and the United Kingdom.
Unit sales to consumers soared more than 40% in all these markets compared in the period. Sweden -- which enjoyed artificially high sales in 1998 as a result of government tax-breaks for employee-purchase plans -- was the only market to see unit sales decline.
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