IDC Reports PC Vendors Face Price Squeeze in W. Europe

LONDON, June 1, 1998 – The Western European PC market is looking buoyant for the rest of 1998 – especially compared with conditions in the Far East – and is becoming a focus for most large PC vendors. International Data Corporation's (IDC's) new report forecasts the total Western European PC market will grow close to 14 percent in unit terms for 1998, just as in 1997. However, there will be an even more significant drop in the average amount spent on a PC than last year – so market revenues in 1998 are expected to grow by just 4.1 percent, down from 8.5 percent in 1997. Short term, this means better-

than-ever price/performance for PC buyers. Long term, it is the largest vendors who will benefit, as fewer and fewer smaller firms are able to compete and will drop out of the market.

"The dynamics of the PC market in Western Europe have changed," said Terry Ernest-Jones, senior consultant with IDC's European Personal Systems research group. "As typical business configurations for desktop and portable PCs fall further and faster in price, the average lifespan of a business PC will likely shorten. So the frequency of upgrades and the market growth will increase beyond levels previously expected." Lower entry-level pricing, improved product and support/service packaging and more effective marketing will also encourage homes and small businesses to both upgrade a little more frequently and purchase systems for new users. Sub-$700 PCs (including monitor) are already being advertised.

PC vendors shipping large volumes, especially on a global basis, will have a clear advantage in Western Europe and will continue to gain share against the smaller players. The outlook for Western European vendors is generally grim, as

witnessed by the recent fall of the long-established Dutch firm Tulip, the sale of Germany's Siemens Nixdorf PC manufacturing operation to Acer, and the slide experienced by Italy's Olivetti.

Beyond 1998, unit growth rates – and average selling prices – will decline, and the compound annual growth rate will level out at 11.1 percent for the five-year forecast period. Mainly small- and medium-sized enterprises and homebuyers will drive sales, with value trailing way behind unit growth. After the year 2000, IDC expects volume growth to drop, as real competition from other client device types, including Web TVs and smart handheld devices, detract from PCs.

A complete analysis by country, channel, processor and form factor is available in IDC's report 'Personal Computers in Western Europe 1997-2002, Review and Forecast' (#JP01EB). This report is $5,500 and is available from your local IDC office.

About IDC

Headquartered in Framingham, Mass., International Data Corporation provides IT market research and consulting to more than 3,900 high-technology customers around the world. With a global network of 375 analysts in more than 40 countries, IDC is the industry's most comprehensive resource on worldwide IT markets, products, vendors, and geographies.

IDC/LINK, an IDC subsidiary, researches and analyzes the home computing market, leading-edge technologies in telecommunications and new media, and the convergence of computing and consumer electronics.

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