UBS Warburg analyst Don Young pointed an accusatory finger today at Europe for the current weakness in the PC industry.

Citing further deterioration in PC demand in Europe, Young cut his industry shipment growth forecast to 2% from 5%, "given the lack of improvement in global PC demand."

In a research note, the analyst recommended only

Microsoft

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, saying that he sees the Redmond, Wash., Windows operating system maker as the only company that will benefit from the price war that's resulted from the slowdown in demand. On the flipside, he said that

Compaq's

(CPQ)

next quarter will likely face the most risk, as it has the greatest European exposure of all the PC vendors and the biggest problems with overstocked inventory.

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Young believes that Compaq will fall short of the company's prior guidance of $9 billion in revenue and earnings of 5 cents a share when it reports later this month. Young expects earnings of 3 cents a share, while the consensus estimate calls for income of 4 cents.

The analyst said

Apple

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and

Gateway

(GTW)

may emerge relatively unscathed by the ongoing price wars. "GTW, in particular, is benefiting from its new price guarantee that is raising store visits while also enabling higher pricing," he wrote.

Microsoft climbed 0.5% to $66 in recent trading, while Compaq lost 1.4% to $14. Apple rose 11 cents to $22.81, and Gateway dropped 3.2% to $14.32.