(FORTUNE Magazine) – To American eyes, European information technology, much like a European village, seems quaint. The Continent has never developed a computer industry to rival that of the U.S. But technologically backward as Europe is now, it's getting even more so: Not only doesn't Europe produce much infotech, its businesses aren't using much infotech either--and that has grim implications for European industry as a whole.

Executives from American high-tech companies are acutely aware of this trend and have been issuing dire warnings of late about the risks to Europe's industrial competitiveness if the Continent doesn't keep up in computing. "Competitiveness today means speed," says Intel's general manager for Europe, the Middle East, and Africa, Hans Geyer, "and speed comes from PCs, E-mail, and using the Internet." In a recent speech in Europe, Geyer's boss, Intel CEO Andy Grove, warned of a growing "technology deficit," noting that even some less developed Asian countries are moving past Europe in their use of networked personal computers. Europe's companies "operate like old-line U.S. companies did ten years ago," he said at one stop. Microsoft's Bill Gates, also in a recent speech, spoke urgently about Europe's radically lower rates of business Internet usage compared with those of the U.S.

Gates, Grove, and Geyer may sound self-serving--Intel and Microsoft stand to make enormous amounts of money if or when Europeans decide to bring their technology up to date--and American companies do tend to overstate the benefits of computers. They are not overstating the danger facing Europe, however, and other people who follow the industry tend to agree with them. "Europe is horribly behind the U.S. on new technology," says one expert, Michael Gale, a Briton who researches the European market for Austin, Texas-based IntelliQuest. "It's scary. There's significant trouble ahead for these guys," agrees Aaron Goldberg of Computer Intelligence (CI), which surveys computer use at companies around the world.

The numbers are shocking, especially for the larger countries such as Germany, France, Italy, and Britain. IntelliQuest figures that 54% of the adult population of the U.S. uses a PC either at home or at work; the figure for France is 33%. Among white-collar workers, Microsoft data show that in the U.S. more than 90% use a PC, whereas in Western Europe only 55% do. CI finds that for a typical large business site with more than 1,000 employees, there are 75% more PCs and five times as many local area networks installed in the U.S. as there are in Europe. Moreover, since technology adoption is growing more slowly in Europe than in either the U.S. or Asia, Europe is falling ever further behind. The U.S. market for PCs grew 15% in units during 1996, but in Western Europe it grew only 7.1%, according to International Data Corp.

There are a lot of reasons for Europe's technological lag, including ongoing economic weakness and an aversion to tools considered overly "American," notably in France. There also appears to remain a continent-wide cultural resistance to the information sharing that goes with widespread personal computing. Intel's Geyer has observed that, amazingly, CEOs of several European PC companies don't have computers in their offices. "Let's not even talk about other industries," he says, "where in most cases the chair the CEO sits on costs more than a good PC." Explains CI's Aaron Goldberg: "In many European companies the goal is to rise to a high enough position where you don't have to use a PC. It's a status symbol not to use one."

Though most American business people find such Luddism hard to believe, some of Europe's foremost technologists shrug it off. Francois Fillon, France's minister of postal service, telecommunications, and space, is surprisingly upbeat for someone known as an aggressive campaigner for greater use of technology. Fillon says that to assess France's progress, you must count not only PCs but also France's seven million terminals for Minitel, the aging government-sponsored online system. Most experts outside the French government, however, argue that while Minitel was revolutionary when introduced in the early 1980s, it's been obviated by the Internet. Nonetheless, says Fillon, France has "extremely ambitious plans to bring about the total integration of France into the information society, using French means and French methods."

Europe does have some successes, technologically speaking. A few of Europe's smaller nations, including Sweden, Finland, and the Netherlands, are among the world's most technologized. CI also finds that the computing gap with the U.S. is much narrower among smaller firms. Europe is actually ahead of the U.S. in the use of digital cellular phones, as well as in the use of electronic smart cards instead of cash for consumer purchases. On the Internet, too, there are some signs of European progress: Netscape, the Internet software powerhouse, says sales of its Net server software are booming in Europe.

But these are only a few bright spots in an otherwise bleak European tech picture. "I'm scared for European industries today," says Intel's Geyer, who then adds melodramatically, "and I'm scared for the future of my children." He's also scared for the future of his company's sales, of course, but his fears about Europe's future are justified.

REPORTER ASSOCIATE Lenore Schiff