Tuesday April 28, 7:26 am Eastern Time
INTERVIEW-CONTEXT sees record Europe PC sales
By Neil Winton, Science and Technology Correspondent
LONDON, April 28 (Reuters) - Personal computer sales in Europe will hit record highs over the next two years, boosted by tumbling prices and demand for millennium bug-free products, British technology research company CONTEXT said on Tuesday.
Consolidation would continue, with the biggest operators expanding their business at the expense of smaller players, said Emmanuel Lalloz, senior personal computer research analyst at CONTEXT.
Price pressures make profits elusive in the race to sell PCs, which have become more like commodities. Profits will only be available to companies that manage their stocks carefully, and can sell high-margin products such as servers along with cut price PCs, Lalloz said in an interview.
Last week saw Europe's personal computer shakeout continue. Siemens Nixdorf (SIEG.F) of Germany, Europe's leading personal computer maker, turned over most of its PC business to Taiwan's Acer Inc (2306.TW).
Siemens had struggled for years to wring profit out of its computer unit. Acer will take over PC development and production from Siemens, make a Siemens' plant its main European production site, and supply computers that the German company will distribute under its own name.
Last Friday, Tulip Computers NV (TULN.AS) of the Netherlands (TULN.AS), one of Europe's last independent makers of personal computers, sought court protection from its creditors.
''There will be more pressure on prices. In the next months Intel's (Corp (INTC - news)) new Celeron chip will allow manufacturers to sell and build at much lower prices. We will see more pressure on prices, especially on desk-tops. This won't stop, it will accelerate,'' Lalloz said.
''The top five will consolidate market share; they are growing much faster than the (average) market rate,'' Lalloz said.
On Monday, CONTEXT announced its preliminary figures for 1998's first quarter, showing PC sales in western Europe jumped 21.1 percent to 5.57 million.
COMPAQ Computer Corp (CPQ - news) of the U.S. strengthened its position as leader with a 14.8 percent market share. Second place International Business Machines Corp (IBM - news) accounted for 8.3 percent, followed by Dell Computer Corp (DELL - news; 7.8 percent), Hewlett-Packard Co (HWP - news; 7.6 percent) and Siemens (5.6 percent).
Prices were under pressure.
''CONTEXT has calculated that, in one year, desktop prices have, on average, gone down 18 percent in the UK and 22 percent in Germany. Over the same period, portable prices have decreased 14 percent in the UK and 16 percent in France.''
Fears over the millennium computer bomb will spur sales. Some computers programmed to read dates as two digits such as 98 or 87 may crash when 2000 dawns.
''Corporations want to make sure they have got rid of the Year 2000 bug by buying new PCs - it's the simplest, most cost effective way in the long-term - this is a big opportunity for the PC manufacturers,'' Lalloz said.
Sales in 1998 and 1999 will explode.
In January, CONTEXT had predicted growth of 17.4 percent for 1998 to 22.9 million PCs.
''I think if anything that was conservative. Now we see growth of between 18 and 20 percent for '98, much better than we expected one quarter ago.
''In 1999, we see 20 to 22 percent growth, there's a lot of potential out there. We won't be far short of selling 30 million PCs, probably around 28.5 million,'' Lalloz said.
1997's 19.7 million was the previous best ever year for PC sales in Europe.
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