Dell grows despite worst fall in PC shipments

Eric Auchard

NEW YORK: Personal Computer shipments fell year-over-year for the first time

since 1986, as Dell Computer Corp.'s market share surged at the expense of other

top PC makers, quarterly surveys showed.

Data from market researchers Gartner Dataquest and International Data Corp. (IDC)

that were released on Friday found the market for desktop, notebook and PC

servers fell two percentage points to around 30 million units shipped during the

second quarter.

Dell, which became the world's No 1 PC maker during the first quarter after

displacing former leader Compaq Computer Corp., was the only top-tier vendor to

grow both worldwide and in the United States in the latest quarter. "It's

real simple. Dell cleaned up," Loren Loverde, head of International Data

Corp.'s worldwide PC tracker program.

Dell shipments increased particularly in Japan, Asia/Pacific and Latin

America, recording 30 per cent to 50 per cent growth, according to preliminary

Dataquest data. Dell's growth rate was 20.2 percent for the quarter ended in

June. Compaq saw second-quarter shipments drop 14.4 per cent, while

International Business Machines Corp., Hewlett-Packard Co. and NEC Corp., the No

3-5 ranked PC makers respectively, each fell by single digits.

The second quarter was the first time the worldwide PC market has had a

negative growth rate since 1986, according to Dataquest. "This is the first

time we've had a worldwide decline since 1986 on a year-over-year basis,"

said Todd Kort, principal analyst at Gartner. "Among the top five vendors

in the US, Dell was No 1. They had a share of 23.6 per cent of the market."

While IDC and Dataquest numbers generally agreed on the downward trends in

the market, they differed slightly in actual numbers that reflect marginally

different definitions of what sorts of server PCs each includes in their

surveys. Servers are PCs used to manage networks of other PCs.

Asian sales far worse



Shipments to Asia fell far more sharply than previously forecast and Europe
shipments also lagged. The US market, while the hardest hit, fell in line with

previously lowered expectations, according to IDC. The Japanese market was down

year to year and appears to be following the US trend, IDC's Loverde said.

Dataquest said that while by historic patterns Europe is overdue for one of

its periodic once-every-three-years-or-so upgrade cycles, the region looks set

to post a decline in growth, joining the US market, which has fallen back two

quarters running.

Dataquest figures showed the US market fell 6.1 per cent to 10.7 million

total units shipped in the second quarter while IDC data showed an 8 percent

drop during the same period. "Without a major shift in the PC industry

structure, future sustained high-growth rates are improbable," said Todd

Kort, principal analyst of Gartner Dataquest's Computing Platform Worldwide

group.

"For the time being, vendors continue to opt for price cutting rather

than changing PC design to stimulate growth," he said. Kort said the

Western European market would show a low single-digit percentage decline during

the second quarter. Japan grew about 5 per cent, year-over-year. The

Asia-Pacific region as a whole will grow about 9 per cent year over year. Latin

America will grow about 11 per cent year over year.

Threat even greater



Dataquest warned that a downward spiral threatened to envelop the industry
if dramatic changes are not made in the industry in short order. Facing flagging

sales, PC makers are focusing on managing their profit margins, even as a price

war slashes profitability. In response, all major PC makers have announced big

job cuts. These pressures threaten to hurt customer satisfaction with PC product

quality, Dataquest said.

Roger Kay, also of Framingham, Massachusetts-based IDC, said the only silver

lining in the industry figures were that while declines continued, they appear

to reflect normal sequential patterns of first half sluggishness, typically

followed by second-half strength, albeit at lower levels.

Any industry rebound is likely to begin in the United States, the earliest to

enter the economic downturn, but will depend on the strength of back-to-school

PC sales in the third quarter and end-of-year holiday sales in the fourth

quarter. Microsoft's introduction of its upgraded consumer operating system,

known as Windows XP, could act as a mild stimulus.

"US stability will really help other regions," Loverde said of the

impact an economic recovery in the United States would have on PC fortunes

worldwide. However, he predicted that US personal computer market recovery might

not show up until late this year or early next.

(C) Reuters Limited 2001.