Samsung To Exit European Laptop Market As Second-Tier PC Makers Struggle

Samsung will exit the European laptop market in a move analysts describe as a thinning of the PC herd.

The decision highlights problems plaguing smaller makers of PCs such as Samsung, Toshiba and Sony that can't maintain economies of scale to make selling PCs profitable.

Samsung said Wednesday it would exit the laptop market and stop selling its Ativ and Chromebook notebooks in Europe.

[Related: Toshiba Renews Channel Commitment, Debuts 2 SMB Tecra Laptops]

"We quickly adapt to market needs and demands," the company said in a statement. "In Europe, we will be discontinuing sales of laptops including Chromebooks for now. This is specific to the region -- and is not necessarily reflective of conditions in other markets."

Samsung's move comes on the heels of Toshiba announcing last week it was reducing its PC workforce by 900 employees and it would de-emphasize its consumer PC business in some markets and refocus on business systems and solutions. Sony threw in the PC towel in February after 17 years and said it would shutter its Vaio brand by the end of 2014.

The industry is in a very mature phase of the PC market and consolidation is a given, said Roger Kay, principal analyst at Endpoint Technologies Associates.

"There are economies of scale needed to amortize an OEM's PC business," he said. "It doesn't pay to be in just one or two markets. Samsung has a healthy phone and tablet business and I'm sure they are weighing how much they are getting beaten up and asking themselves if it's worth it to sell PCs period."

Leading PC makers Lenovo, Hewlett-Packard and Dell have big enough market share and have their hooks deep enough into the business market to make PC sales profitable, Kay said.

"They are making margins -- albeit small -- on PC sales, but they are also selling services, solutions, storage and servers into these companies as well," Kay said.

It may not be long, he added, before we see Toshiba and Samsung join Sony and throw in the PC towel.

"I don't see how any one of these companies can simultaneously reduce their geographic footprint, reduce their economies of scale and hope to make PCs more profitable," Kay said.

According to IDC, business PC shipments have outperformed overall PC sales. Thanks to Chromebooks, Windows XP upgrades and improved channel partner alignment with OEMs, U.S. PC shipments jumped 6.9 percent in the second quarter, while global shipments for PCs fell 1.7 percent, the smallest decline in two years, according to IDC.

"Despite all the evidence to the contrary, our PC business is very strong, growing 15 percent over the past year," said Douglas Grosfield, CEO of Xylotek Solutions, an Ontario-based solution provider and both a Dell and Lenovo partner.

NEXT: Channel Partners Say PC Business Is Strong

While margins have shrunk, OEMs have stepped up with more channel partner incentives, Grosfield said.

"Five years ago we used to make 10 percent margins on PC sales," Grosfield said. "Today those margins have nearly evaporated. But we are still making good numbers on PCs thanks to co-marketing funds, new customer bonuses and front-end and back-end rebates."

Grosfield said driving new PC sales in his business is thin and light, hybrid, 2-and-1 PC form factors.

The European market, according to research firm Gartner, represents 19 percent of the global PC market -- on par with the U.S. market. PCs generated $193.3 billion in worldwide sales last year.

Lenovo leads in PC shipments with 19.2 percent of the global market, according to Gartner's second-quarter report. That's followed by HP with a 17.7 percent share, Dell with 13.3 percent and Acer with a 7.9 percent slice of the pie.

"If a vendor is not in a good position in the business PC market, it's going to be very difficult to succeed," said Mika Kitagawa, principal research analyst at Gartner. "The PC has to be a springboard to other sales or the margins just aren't there."

For market share leaders, such as Dell and Lenovo, the PC is far from an IT afterthought and central to a larger effort to win more lucrative IT business.

"The PC represents a $200 billion market that we have 19 percent share of," said Brion Tingler, Lenovo global director of corporate communication and public affairs. "When other people exit the market, it provides us an opportunity to go after their share. Our CEO (Yang Yuanqing) has said there will be consolidation and that is exactly what is happening."

Tingler said Lenovo values the PC space and sees it as core to Lenovo's ecosystem of devices.

"Anybody who is looking at the PC alone is missing the big picture," Tingler said. "The PC, tablet [and] smartphone is all part of a smart-connected device strategy."

As others exit the PC space, Tingler said, it will only embolden Lenovo and allow it to achieve better economies of scale and drive efficiencies in PC technology that can be leveraged into a larger Lenovo ecosystem of tablet and smartphone devices.

PUBLISHED SEPT. 24, 2014