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By editorial@silicon.com, 13 August 2001 18:07

COMMENT The onslaught on the PC market continues this week with results expected from HP and Dell, but the most depressing news is that the worst is yet to come for Europe. The PC Kings are expected to confirm industry fears that sales have slowed to a trickle. Despite recent sequential profit warnings this is the first shipment decline and analysts say the storm will worsen. Gartner figures show sales across Europe are at their lowest since the 1980s with a drop of four per cent. Brian Gammage, analyst at Gartner warned that the market might be hitting the bottom "but we're not going up yet." The same warning came from John Chambers, CEO at Cisco, who told analysts at the company's recent end of year financial results meeting that Europe had so far been sheltered from the storm. But not for long. The US is showing signs of stability but Europe may get worse before it gets better.
Chambers added an extra warning: "This might have a negative impact in the US and cause a second round of economic challenges." But it is not just PC manufacturers in Europe that will feel the tightening pinch. Telco equipment vendors are also taking a beating. In a report entitled Last Orders, analysts at Goldman Sachs warned that the US communications industry was suffering from a severe recession, which had yet to hit Europe. Well-documented high costs associated with the ramp up to 3G, a dying handset market and price wars have all had a negative impact. The situation for all concerned is unlikely to get better before the end of the year. PC vendors are waiting for the P4 chip from Intel and Microsoft's Windows XP to boost sales. Equipment vendors are waiting for the end of the summer holidays, when CFO's set budgets and get down to the serious business of trying to make money from 3G. Roll-on autumn.