Sustained Demand in Western Europe Continues to Drive PC Shipments in the EMEA Region, IDC Reports

LONDON, UK, July 26, 1999 — Driven by sustained demand in both business and consumer markets in Western Europe, the PC market in Europe, Middle East, and Africa (EMEA) rose by 15.5% in Q2 1999, according to preliminary data released today by International Data Corporation (IDC). The Western European PC market continues to drive the entire EMEA region, with PC sales rising 18.4% in Q2 1999 compared with the same period last year. All product categories experienced high growth — despite a slowdown in the consumer boom, desktop sales remained high and notebook and PC server sales continued to grow. However, pressure for low-priced PCs, increased competition in the notebook market, as well as the evolution of the PC server product mix with a large share of entry-level packages contributed to weaker growth in value. "The European PC market continues to benefit from strong demand across all segments. Internet and cheaper PCs fueled the demand for PCs on the consumer market. On the business market, Y2K compatibility remains a strong accelerator. It stimulated corporate renewals in the previous quarters and is expected to drive the small business sector in the second half of the year," said Karine Paoli, EMEA PC Tracker program manager for IDC.

Market Highlights

Except in Sweden — where the market is still affected by the employee purchase schemes of 1998 — all Western European markets remained very healthy across the region. Driven by the continuous increase of the consumer market and Internet as well as strong medium and large business investments, France experienced another strong quarter with PC sales rising more than 27%. In the United Kingdom, the consumer market remained quite solid, also driven by the Internet boom and the ISP war, as well as PC sales fueled by sustained business demand. In Germany, the slowdown of the consumer market penalized the desktop market, but notebooks and PC servers continued to show very high growth. The Nordic region as well as Southern European countries also experienced an average 20% unit growth. Eastern and Central Europe continue to be impacted by the decrease in unit terms of the Russian market. However, the slow recovery of Russia as well as the continuous growth of Poland and other emerging countries of the region limited the decline this quarter to -2.9% year-on-year, compared with -14.3% in Q1 1999 and positive growth is expected in Q3. The Middle East and Africa PC markets experienced another slow quarter with PC shipments rising only 9.7% in the overall region. After the very strong growth in 1998, the three major markets of the region — South Africa, Israel, and Turkey — continue to slow down.

Q2 1999 Vendors' Performances: Compaq Maintains Its Leadership but Faces Increased Competition from Dell, IBM, and Hewlett-Packard

Most major vendors outpaced the market growth and gained share in unit terms, but the market remains very weak in value terms. Increased competition among branded vendors as well as from local brands on all product segments continued to squeeze margins and revenue growth. The recent merger between Siemens and Fujitsu — not taken into account in the following figures — underlines the continued consolidation of the market.

Compaq maintained its leadership in the EMEA market with 17.2% market share and 18.6% in Western Europe, but faced increased competition from Dell, IBM, and Hewlett-Packard on all product ranges. Affected in the desktop and notebook markets, Compaq maintained clear leadership in the PC server market, taking advantage of the strong demand for lower entry products. Combined with slower unit growth, the evolution of its product mix, however, impacted the leaderÕs performance in value terms.

IBM experienced another strong quarter, and with 48% unit growth of its PC shipments, consolidated its number-two position in the EMEA region. IBM's continuous efforts are paying off, and Big Blue is making a strong comeback on all product lines — in the commercial desktop market as well as in the notebook and PC server markets.

Dell continues to reinforce its position in the European marketplace. Maintaining its number-two position in Western Europe with a 10.7% market share, the leading direct sales company continues to experience very high growth in the desktop as well as in the notebook and PC server marketplace. While consolidating its position on the corporate market, Dell is also expanding onto the small and medium-sized business markets.

Hewlett-Packard also experienced a strong quarter, increasing its PC shipments nearly 40%. After the poor results of the first quarter, this performance enabled the vendor to regain the fourth position both in the EMEA region and in Western Europe, thus consolidating its positions in the desktop and PC server markets. HP also strongly increased its market share in notebooks.

Top 5 Vendors, Europe, Middle East, and Africa (EMEA) PC Factory Shipments,

Second-Quarter 1999 (Preliminary) (000)

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| Vendor | Q2 1998 | Share (%) | Q2 1999 | Share (%) |

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| Growth (%) |

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| Compaq Group | 1,048 | 17.1 | 1,217 | 17.2 |

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| +16.1 |

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| IBM | 456 | 7.4 | 677 | 9.6 |

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| +48.3 |