Manufacturers far exceeding early sales forecasts

COMPUTER PROFITS IN EASTERN EUROPE U.S.

September 09, 1991|By Michael S. Lelyveld | Michael S. Lelyveld,Journal of Commerce

U.S. computer-makers are starting to find something unexpected in Eastern Europe: profits.

Despite analysts' warnings about backward markets, hard-currency problems and long-term horizons, Eastern Europe appears to be paying off sooner and better than most computer-makers had hoped. Some even say they're making real money in the market.

For the industry leader, International Business Machines Corp., based in Armonk, N.Y., the region is already a profit center, said Dilip Chandra, general manager for IBM Eastern Europe.

"In terms of financial performance, it's one of the best, if not the best unit in IBM," Mr. Chandra said.

IBM doesn't like to get too specific about the numbers, but it is turning a profit in every Eastern European country it sells in, he said. In fact, he says, IBM sales have topped the 21.7 percent annual growth rate that market research analyst International Data Corp. of Framingham, Mass., projected for the region through 1994.

Maynard, Mass.-based Digital Equipment Corp., the No. 2 manufacturer, is also doing better than it expected in Hungary, where a joint venture that opened in April 1990 has grown from 30 to 80 employees. Although the company still thinks in terms of long-term interests, Digital spokesman Mark Fredrickson said sales in Hungary had already tripled projections.

Roger Wilson, public affairs director for Palo Alto, Calif.-based Hewlett-Packard Co. in Europe, said Poland in particular had been "a roaring success for us" and that growth rates in the region had been over 30 percent.

In some countries, the industry seems to be beating the early forecasts by a factor of 10, sometimes even 20.

According to U.S. Department of Commerce figures, the value of U.S. exports of computer equipment jumped from 1989 to 1990, thanks in part to the easing of multilateral export controls.

For Poland, the increase was 45 percent, for Hungary 226 percent and for Czechoslovakia 502 percent. Even in the Soviet Union, considered the most problematic market and the one still subject to the tightest controls, U.S. sales rocketed 523 percent.

Those numbers could multiply again because a new round of relaxation in multilateral export rules took effect Sept. 1.

Manufacturers agree that two big reasons they have outperformed their own forecasts for Eastern Europe is that their goals were never unreasonably high and their volumes are still relatively small. But even those reservations are beginning to fall.

"When you have large growth rates, small levels become large very rapidly," Mr. Chandra said.

Another reason for success is that computer sales have not been hampered by the lack of hard currency that was expected in the region.

Eastern European countries have overcome the currency squeeze by designating computers as a purchase priority.

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