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NEC recently said it plans to completely exit the PC market in Europe, the Middle East and Africa because of falling revenue and profits and concentrate on its domestic Japanese market. Market tracking firm Gartner expects other vendors to follow as the economic downturn forces further market consolidation and also recommends non-Japanese vendors to revisit their plans both for EMEA and Japan.

NEC has seen revenue for PCs and notebooks in the business market fall 34% in the last three years. As a result, the company announced its intention to exit the notebook and PC market in EMEA and to outsource production of its servers for the EMEA market. NEC confirmed that it plans to shut its Angers, France-based factory, which makes notebooks, PCs, servers and related products. However, a technical team will remain in Angers to focus on supply chain management and customer services for its server and infrastructure business. This news follows NEC's recent announcement of 20 thousand job cuts and heavy losses in its third-quarter financial results.

Gartner expects NEC to focus on Japan and threats it faces at home from international brands. PC vendors Acer and Asus gained greater market share in Japan in 2008. Moreover, NEC's market share in Japan fell from 19.6% in 2007 to 18.7% in the first three quarters of 2008. Japan-based PC vendors face slow sales and don't have the marketing power to support worldwide distribution of their products; they retreated from the U.S. market in the late 1990s and never gained a foothold in the Asia/Pacific region. Panasonic said on 4 February that it was shedding 15 thousand jobs, and Hitachi and Sony also recently announced thousands of job cuts. The exit of NEC and other Japan-based PC firms from EMEA could signal an opportunity for leading PC vendors such as HP, Asus and Acer.

Gartner recommends PC makers in the region to reach out to NEC's business clients in EMEA with offers to pick up service and support contracts in the near term, and hardware upgrades in the future. However, the analysts recommend international vendors to revisit their plans for Japan as they may face more ambitious marketing efforts by NEC.

Gartner's preliminary results for worldwide PC shipments in Q4 2004 show that EMEA accounted for nearly 40% of worldwide PC shipments. But gross domestic product (GDP) predictions in Western Europe have fallen further since Gartner's last forecast and inventory levels continue to decrease. Gartner expects the PC market in EMEA to contract by 8% to 9% in 2009, and does not expect a recovery until mid-2010.

As a result, Gartner sees further consolidation in the PC market with the top three vendors gaining greater market share in 2009. Simultaneously, Gartner expects unprofitable vendors to exit this market.

“Concentrate on profitability, alternative client delivery architecture and cost containment to ensure survival in 2009,” Gartner concludes.

Tags: NEC, HP, ASUS, Acer, Dell, Lenovo

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