Not-so-cheap PCs fail in popularity contest

Entry-level computers weren't popular in Europe this year, but pricey corporate models could save the PC market

Sales of entry-level PCs in Europe were decimated by the weak euro over Christmas, according to new research from Gartner Dataquest. But there is light at the end of the tunnel for Europe's PC market, as big companies are expected to step up purchases in the coming year.

The overall PC market for Europe grew only six percent last year from 1999, hit largely by slow corporate sales, which accounted for 72 percent of the market. Consumer PC sales actually fell 4.7 percent in the Christmas quarter, largely because the strong dollar made it difficult for PC makers such as Compaq, Dell and HP to offer low-cost PCs with attractive features.

"You may get more PC for your money than you did a year ago, but for many entry-level buyers, it is still not enough," said Brian Gammage, analyst with Dataquest's Computing Platform group, in a statement. "The dollar valuation of the euro has held back the specifications of PCs at lower price points, and vendors have not been able to make their offer sufficiently attractive to consumers."

He noted the slowdown did not extend to the rest of the consumer market, with shipments for higher-priced consumer PCs growing over the quarter.

Over the course of the year, the Europe-wide professional segment grew 3.7 percent over 1999 to 25.3 million units while the home market grew 12.2 percent.

The UK received 6.1 million shipments last year, up 7.9 percent over the previous year. Germany was the largest PC consumer, with 7.1 million units shipped, but grew only 4.3 percent over 1999. Shipments to France actually declined last year, totalling 4.3 million, a 1.1 percent decline from 1999.

January has brought a tidal wave of bad news for the PC industry, largely driven by the bursting of the dot-com bubble and an economic slowdown in the US. Several PC makers announced lower-than-expected sales, lowered expectations for 2001 and job cuts. Intel slashed its chip prices by 40 percent earlier this month and PC prices are expected to fall as well this year.

Research firm Context found PC shipments for last year rose only 6.9 percent, compared with growth in the range of 10 to 20 percent over the last four years. IDC found the market grew 9.5 percent over the whole of Europe, the Middle-East and Africa (EMEA).

On the brighter side of things, Europe has not yet followed the US into an economic slump, and corporate sales are expected to pick up this year as large companies replace outdated systems. "The last four quarters we saw a lockdown in the professional segment, resulting in slow growth throughout the year," Gammage stated. "We should see an increase in the uptake of Windows 2000 and a pickup of PC replacements in 2001, which will result in stronger growth."

Compaq's European president Rob Walker recently expressed similar sentiments, saying he is "optimistic" about PC growth in Europe this year.

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