Revenue down overseas, but local giants cope well

Despite the poor results shown by Intel and Compaq, their New Zealand offspring claim to be coping surprisingly well. Although neither company announce regional results, both claim to be faring better than their US counterparts.

Despite the poor results shown by Intel and Compaq, their New Zealand offspring claim to be coping surprisingly well.

Although neither company announce regional results, both claim to be faring better than their US counterparts.

Intel New Zealand PR manager Kate Burleigh says that most of the expected drop in Intel’s revenue is in the Americas and Europe. She says that while Japan is also down, Asia-Pacific as a whole is best described as simply “flat”, despite the ongoing economic crisis in the region.

Intel’s stock plummeted on the announcement of an expected drop in revenue for the first quarter of the year, dragging US share prices, especially high-tech stocks, with it.

Compaq New Zealand general manager Robin Paterson would only say that Compaq enjoyed a good year in 1997 and was looking forward “with confidence” to this year. That flies against Compaq’s March 6 announcement that it expects only to break even for the first quarter.

Both companies blame a highly competitive North American market for part of their woes. A recent survey put PCs in 45% of US homes, pointing to heavy sales in the sub-$US1000 category. Margins on these machines are even tighter than the higher specification PCs.

Intel has announced plans to launch a new chip aimed at sub-$US1000 machines. The Celeron chip is based on the P6 architecture that is found in Pentium II processors. This is a marked departure from Intel’s existing business practice which has been to shun the lower end of the market.

Paterson doesn’t believe the Asian economic crisis has had much effect on the New Zealand PC market. “The worst spin-off for us has been the drop in the New Zealand dollar.” He says most computer companies in New Zealand buy equipment with US dollars and that has led to pricing difficulties.

“While we continue to get manufacturing efficiencies and costs come down, they don’t come down as much as the dollar has.” That has led to prices stabilising or, in some cases, rising slightly.

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