PC makers get post-Y2K blues

After heavy spending, corporate purchasing slows down in US and UK - while the consumer market thrives

The stock markets hammered PC manufacturers Monday, as new data on worldwide PC growth increasingly suggested that 1999's tremendous demand was a Y2K-inspired anomaly.

The US and Europe came in at the bottom of the table for year-on-year sales growth, according to information from several analysis firms.

Dell Computer closed down 5-60/64 to 46-7/16 and Apple Computer fell 4-7/8 to 48-11/16. The American Stock Exchange Computer Hardware index finished down 4.42 percent at 407.54.

Hewlett-Packard fell 5-3/16 to 118-13/16 in composite New York Stock Exchange trading. In other NYSE trading, Gateway fell 4-1/4 to 58-5/8, Compaq Computer fell 13/16 to 26-15/16 and International Business Machines fell 2-1/4 to 112-1/2.

European PC sales in the April-June period were only 7.3 percent higher than the same quarter a year ago, according to market researcher Context. That was even weaker than the first quarter of the year, when sales were up only 8 percent from the previous year.

"[For Europe] it's the worst quarter ever," said Jeremy Davies of Context.

Nevertheless, industry observers said the slump is not as serious as it initially seems -- rather, last year's sales figures were artificially boosted as enterprises prepared for the Y2K bug.

"I think it is an overreaction, because if you exclude last year, which was phenomenal, things look a bit more normal," said UBS Warburg analyst Charlie Wolf. While worldwide growth of PC shipments reached 26.9 percent in the second quarter last year, second quarter 1998 PC shipments grew only 11.2 percent, he said.

A continuing slowdown of corporate sales was the main factor behind the slowdown in Europe, according to Context, with Dell registering less than four percent European growth compared to last year's Q2.

On the other hand, consumer-oriented manufacturers did well. "Vendors with strong consumer, SMB or portable offerings did well and bucked the trend, notably HP showing 14 percent growth for the period, Acer (34 percent) and NEC CI (22 percent), Toshiba (35 percent), and Apple (29.3 percent)."

Experts noted that consumer PC makers, taking Apple's lead, are becoming more creative and competitive in their approach to the consumer market. "PC vendors continue to experiment with colour and new form factors in an attempt to keep the impersonal computer more personal," said Charles Smulders, principal analyst for Dataquest's Personal Computers Worldwide program, in a statement.

Worldwide unit shipments of PCs grew a healthy 18 percent in the second quarter of this year, compared with 26.9 percent for Q2 1999, according to Dataquest. The firm found growth was strongest in Japan, Asia/Pacific and Latin America, where economies are expanding.

HP and Dell grew the fastest among top-tier vendors, but Compaq remained the number one vendor worldwide, despite single-digit growth, Dataquest said.

Worldwide, Compaq had a 12.6 percent market share for Q2 of this year, with shipments growing 5.8 percent. Dell's worldwide market share stood at 10.6 for Q2 2000, on top of 24.6 percent growth.

Reuters contributed to this report.

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