In Europe, microcomputer industry is making up for lost time
Time was when the microcomputer industry in the United States looked like the goose that laid the golden eggs. More recently, the industry looks to have laid an egg, period.
The papers are filled with accounts of falling earnings, layoffs, and in some cases, bankruptcies.
But the microcomputer industry in Europe, which has lagged its US counterpart, has lately been chugging along like the little engine that could. The market for small computers has kept growing, in the small-business sector as well as among major companies.
``The European computer market is alive and well,'' says Gordon Curran, an analyst with Intelligent Electronics Europe, a market-research firm here. ``The PC market will be quite strong and will remain strong through 1986. . . . If the US market rebounds reasonably well, Europe could completely miss the trough'' in the microcomputer cycle.
Moreover, he predicts microcomputer penetration of the white-collar work force in Western Europe will rise from the current 3 to 4 percent to 20 percent by 1990.
A recent IEE study found that the volume of microcomputers purchased by Western European users grew 57 percent in the first half of 1985, compared with the corresponding period last year. This is, in fact, not quite so dramatic as the 67 percent growth for the first half of 1984 over the first half the year before. And of course the growth figures owe something to starting from a small base.
But there is a perception that the growth here is solid. ``In Europe we're not exposed too much to technological change,'' says Mr. Curran. ``In the US, there's a tendency to wait for next year's model. But the Europeans, especially the Dutch and the Germans, tend to be not so reactionary. . . . They're not diverted from their decisions, once they've taken the time to make up their minds.''
Howard Elias, marketing director at Tandy Europe in Brussels, is likewise bullish, but a little more restrained than Curran. ``The European market is probably better than the US,'' but he notes that all is relative. He endorses a view of slow-but-steady growth, more in the range of 15 to 20 percent annually.
``In the US, everybody went crazy with computers. Now it's settled down to a normal business. In Europe, it's been a normal business from the beginning.''
He identifies France as a ``gaining market, with shipments growing faster than any other country.'' (Indeed, Computerland, a Tandy competitor, is opening four stores in France this week.) The United Kingdom, he adds, ``has been a fiercely competitive market. It's still growing, but growing more slowly.''
Will European sales help manufacturers counterbalance any earnings weakness resulting from the US slackoff? ``I'm not sure,'' Mr. Elias says, although he notes that, in a general sense, ``High volume is the key to being a lowest-cost manufacturer, and European sales do provide an outlet for that volume.''
IBM, however, may be a different case, he suggests. Big Blue has a major presence in Europe and has been there ``forever,'' whereas other microcomputermakers have had to start from scratch on the Continent. That gives IBM an edge.
And indeed, IEE predicts that IBM's market share will grow from 28 percent last year to 36 percent this year. Olivetti, helped by its partnership with AT&T, is predicted to edge out Apple for the No. 2 spot.
On the timing of this microcomputer boom or sort-of boom, Curran notes, ``The low-priced microcomputer came out at time when Europe was climbing out of recession.'' European businesses were feeling flush, but not that flush. A micro-investment in a microcomputer has looked like a way to improve productivity without destroying cash flow.
Computer dealers have naturally reached out to small businesses, especially since, with competition heating up, the manufacturers have put dealers on notice that they will sell directly to big customers themselves.
``But a lot of small businesses are not easily computerized,'' Curran says. ``With something like a garage, you've got people who just shove checks into their pockets, who keep all their records in a shoe box, who get paid in cash. . . . Dealers have got to teach people to structure their businesses so that they can be computerized -- no one's been doing that until lately.''
Elias suggests it may be an uphill battle. ``In the US 50 years ago you had the corner butcher, the corner baker, and the corner candlestickmaker. Now they've developed into the supermarket, and the department store. But in Europe, even in the major cities, they've still got the corner butcher and so on. And part of that has to do with the way society is organized.''
Another ``retarding factor'' for microcomputers here, Curran notes, ``has been that software has not been available in the national languages of Europe.'' And he doesn't mean just, say, Flemish or Portuguese. He means French and German.
``It was only in late 1984 that software began to be available in the national languages.'' Translation is expensive -- running some $75,000 to $100,000, Curran estimates -- and takes time, about six months. Some of these problems should ease as software producers, newly fascinated with the European market at a time of slackness in the US, start designing programs with translations in mind.
Elias concurs on the language problem: ``Even now it's still holding the market back -- it's the biggest problem in Europe.''
There are also different keyboards, regulations, and safety standards at each frontier, making economies of scale hard to achieve.
But, he concludes, ``Europe is still possible, and still worth it.'' CHART: European microcomputer deliveries Growth in shipments Britain West Germany France Italy Scandinavia Others Total First half '83 to first half '84 First half '84 to first half '85
57 Source: Intelligent Electronics (U.K.) Ltd.