Computer Industry Competition Causing Supply Chain Woes

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Competition between computer manufacturers has been favorable for consumers but has had an adverse effect on companies down the supply chain according to industry analysis from global accounts receivable services provider Euler Hermes ACI.

The result of the fight for market share has brought steep discounts by computer manufacturers, which in turn has resulted in much lower margins and profitability.

Competition between computer manufacturers has been favorable for consumers but has had an adverse effect on companies down the supply chain, according to industry analysis from global accounts receivable services provider Euler Hermes ACI.

"The battle between computer manufacturers to provide more efficient and less expensive systems has been a beneficial trend for consumers, but a hurtful development for the companies that are providing the materials to manufacture the machines," said Euler Hermes ACI Risk VP-Industry Manager Patrick Lane. "The result of the fight for market share has brought steep discounts by computer manufacturers, which in turn has resulted in much lower margins and profitability."

The U.S. computer industry is seen as "saturated," Lane said. "With the emergence of cell phones with increased computing and Internet capabilities, there has been a notable slowdown in the sales of personal computers to consumers." However, he said two industry trends will help computer manufacturers experience continued growth in 2007: the shift in preference to notebooks and laptops, and the arrival of new computers on the market designed to carry the new Microsoft Vista operating system.

"Vista, in particular, should cause a bump in sales because just about anyone who wants to use the operating system will need to upgrade to a faster machine," said Lane.

The price war to attract consumers will most likely continue -- and possibly worsen conditions for suppliers -- as the U.S. economy continues to experience a slowdown. Euler Hermes ACI Chief Economist Dan North said that businesses that rely on consumer spending may see tougher times ahead as housing market equity, which has fueled consumer spending in the past, continues to fall. "As of January, asset value equivalent to 15% of GDP has disappeared from the housing market," he said. "This fall in value will destroy some of the equity built in the past few years, drying up what has been a major source of spending for consumers."

North predicts that "a faltering consumer will surely lead to a faltering economy," causing business defaults to rise and credit conditions to deteriorate. While the computer industry has been experiencing very low business bankruptcy rates over the past several years, Lane said that "expectations are that default rates will increase in 2007."

As business and economic conditions continue to decline, companies involved in the business-to-business arena need to be increasingly vigilant about their accounts receivable. Euler Hermes ACI offers a complete range of accounts receivable management products and services, including trade credit insurance, business intelligence information, commercial third party collections, receivables management outsourcing, and international collections. For more information about Euler Hermes ACI products and services, visit http://www.eulerhermes.com/usa.

Euler Hermes ACI is North America's oldest and largest provider of trade credit insurance and accounts receivable management solutions and is the US subsidiary of the Euler Hermes Group. Headquartered in Owings Mills, MD, the company protects and insures more than $150 billion in US trade transactions annually. Additionally, Euler Hermes ACI provides a suite of receivables management services that includes commercial third party collections, receivables management outsourcing, and international collections. For more information, visit http://www.eulerhermes.com/usa.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,500 employees in 49 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 2.01 billion euros in 2006.

Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor's rates the group and its principal credit insurance subsidiaries AA-.

Press Contact:
Rick Ostopowicz
Euler Hermes ACI Public Relations and Communications Specialist
Phone: (410) 753-0652

These assessments are, as always, subject to the disclaimer provided below.

Cautionary Note Regarding Forward-Looking Statements: Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words 'may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue' and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz SE's core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults (vii) interest rate levels, (viii) currency exchange rates including the Euro-U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. The matters discussed herein may also involve risks and uncertainties described from time to time in Allianz SE's filings with the U.S. Securities and Exchange Commission. The Group assumes no obligation to update any forward-looking information contained herein.

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RICK OSTOPOWICZ
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