Industry looks to Europe for rescue
IDC Forum Vendors hit by Asian crisis count on internet growth.
Hewlett Packard's chief executive Lew Platt admitted that theh. economic crash in Asia had taken the manufacturer completely by surprise and that revenue from Korea alone slid $600 million this year.
Talking at IDC's European Forum, Platt said that after some years of hard work and gradual success in emerging markets, the Asian crash - now spreading to other parts of the globe - had been a sudden shock.
'The thing we didn't understand was how quickly some of the emerging economies in the world were going to collapse on us. In Korea, for example, a market that hit $1 billion at its peak will not bring in $400 million this year. That's $600 million of sales we've got to find elsewhere just to get zero growth,' he said.
Indonesia, Malaysia, Russia and Brazil were just some of the other markets hitting big problems, Platt noted. Even the previously hot US market is starting to cool, he said, the next few months will see slower sales growth in the US and only Europe is providing positive sales performance.
'We are trying to get people to reset their expectations. It is hard when you are a $40 billion company to keep getting 20 per cent growth,' stated Platt.
Also speaking at the forum, Scott McNealy, chief executive of Sun Microsystems, admitted the manufacturer was being hurt quite significantly by the Asian crisis and joined other computer vendors in describing Europe as the strongest performing economy.
McNealy said Sun was performing strongly but was being hurt by regional economic crises.
'There is no question we would like to see a stronger Asia. We have lost four to five per cent revenue growth to Asia compared to last year and another three to four per cent in currency charges. That is quite impressive considering we still grew at 13 per cent over last year,' he said.
Sun's president also took the opportunity to put his customary hobnailed boot into Microsoft chief Bill Gates and the Windows operating system.
McNealy claimed: 'There are only two computer companies left - Sun and Microsoft. Everyone else is just a reseller for Microsoft and Intel. Almost no one makes money out of Microsoft and Intel except Microsoft and Intel.'
McNealy responded to Gates' claim that the cross-platform interoperability was a ludicrous ambition by saying he had never met an IT director who did not want interoperability. He said companies would be crazy to bet on Windows NT 5 for mission-critical systems, given that it had 40 million lines of code and climbing - much of it brand new.
Sun announced a raft of software designed to improve interoperability between Windows NT and Sun's Unix operating system, Solaris, at its Enterprise Forum in New York on 8 September.
However, McNealy said he did not believe that Windows had a monopoly in the software market and noted there were protocols and application programming interfaces, such as HTML, TCP/IP, Java and even Windows mail protocols, that considerably out-shipped Windows. The number of internet appliances would also far exceed the number of Windows platforms, he claimed.
According to a senior industry analyst at the forum, Europe could soon leapfrog the US in the internet commerce stakes.
The gap between the US and Europe in Web usage has narrowed so much over the past year that the US is now ahead by only a few months, calculated IDC analyst, Frank Gens.
The number of European Web sites has also doubled during the period, although it is the larger businesses in Europe that tend to lag behind.
But although Web traffic has grown overall, there are considerable regional variations within Europe.
IDC forecast that the number of internet commerce buyers will increase worldwide from 97 million in 1998 to 320 million in 2002, and estimates that the European share will grow slightly from 19 per cent to 23 per cent.
According to IDC, internet usage in Europe is strongest in the Nordic countries and weakest in France and Italy. Germany is at the top of the online purchasing league, while Italy enjoys a particularly high percentage of internet buyers. The UK lies in the middle. The general trend is that once users begin to shop online, they become hooked.
Business-to-business transactions will continue to dominate the market, increasing from 66 per cent to 79 per cent. The Web commerce market will leap from $32 billion to $425 billion between 1998 and 2002. This contrasts with the global economy, in which the consumer sector rather than business sector represents 61 per cent of spending.
Ecommerce is not currently profitable at a macro level. IDC estimated that online costs are $17 billion and sales only $32 billion. However, by 2002, it believes the ratio will change to costs of $32 billion and sales of $426 billion.
Looking at US data, IDC said appliances used to shop on the internet will increase from some four per cent to 43 per cent over the next four years, leading to a decline in the dominance of the PC.
There is uncertainty as to which software supplier will come out on top.
About 25 per cent of the US respondents polled by IDC believe Microsoft will control the market, compared with only 10 per cent of Europeans surveyed.
IBM was mentioned by about 10 per cent of people - a result of its recent marketing blitz.