Mobile growth slows Europe PC sales

By CNN Financial News Correspondent Diana Muriel

LONDON, England (CNN) -- Sales of personal computers in Europe are slowing as fewer businesses upgrade hardware and the consumer market focuses on the mobile sector.

Even though PCs are faster and more powerful than ever, European consumers are switching to alternative mobile Internet access and e-mail devices.

Meanwhile, businesses are putting off computer upgrades because of the high cost of new systems, the low reliability of much of the available business software, and the fact that older systems can still do the job.

"Many people bought a PC just before Y2K. They were worried that their existing machines wouldn't work, and so they upgraded just to be safe," said Paul Cooper of Sarasin Investment Management in London.

"The other issue, the more structural reason why PCs are not seeing the demand we've been used to, is that the PC is increasingly a communications device rather than a computational device."

Fourth-quarter PC shipments rose just 6.9 percent over last year to 10.7 million. That compares to 11.7 percent in the 4th quarter of 1999 and 20 percent in 1998 and 1997.

The slowdown in European PC sales is hitting computer makers and software companies alike.

Software giant Microsoft and chip-maker Intel have both said growth will slow. Intel is particularly vulnerable as its major buyers -- PC manufacturers -- tighten their belts.

Intel and Oracle both have new products due out at the end of the year. But even that may not be enough to turn things around.

"There are lots of good reasons why IT end-users will upgrade infrastructure -- and that's hardware and software -- (at the) tail end of this year," said George O'Connor of Old Mutual Securities in London.

"Now one of the challenges for this year is that the macroeconomics side is starting to harshen, and we're seeing your return-on-investment argument has to be a lot more secure this year as opposed to last year."

Computer makers Gateway, Compaq and Dell have all warned of lower earnings for the fourth quarter of last year. Apple computer says it will fall into the red. Observers say the slowdown in sales is likely to continue throughout the year.

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Compaq UK
Dell UK
Gateway UK
Intel
Microsoft
Oracle
Sarasin Investment Management
Old Mutual

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