HP retakes No. 3 spot from IBM

Nicole Volpe and Peter Henderson

NEW YORK: Hewlett-Packard Co. pulled ahead of International Business Machines

Corp. to become the No. 3 personal computer maker worldwide in the third

quarter, market research firms said on Monday.

The two computer makers have been battling for the No. 3 spot since IBM

announced last year it was exiting the US consumer retail market, giving HP a

chance to close in. Hewlett-Packard seized the No. 3 spot in the first quarter

of this year, but IBM came back to tie for third place in the second quarter,

market research firm Dataquest said.

"They were really close last quarter," said International Data

Corp. analyst Loren Loverde. "But HP has been on a pretty aggressive growth

track. I think the momentum is behind HP this quarter."

HP shipped 2.6 million PCs in the third quarter - a rise of 40.2 per cent

over the year before, IDC said. IBM shipped 2.5 million PC units, up 8.3 per

cent from a year ago. HP had 7.8 per cent of the overall PC market, and IBM had

7.4 per cent.

Shares in HP rose $5-1/16 to $96 on Friday.

Dataquest, a unit of Gartner Group, also showed HP in third place globally,

with 38.6 per cent growth to 2.6 million PCs shipped.

Dataquest said worldwide personal computer shipments rose 15.2 per cent to

33.9 million units while IDC said the market grew to 33.3 million, an 18.3 per

cent increase.

The two firms measure the same market for desktop and portable computers, as

well as small servers, the central computers in networks. Their numbers vary

slightly because of different research methods.

"HP showed the largest increase in shipments among top-tier

vendors," the Dataquest report said. "It had continued success in the

US retail space taking advantage of the absence of IBM and Packard Bell."

IBM, the world's largest computer maker, pulled its PC business into

profitability for the first time in nearly a year in the third quarter, by

dropping out of the US consumer retail sales market.

Both IDC and Dataquest said IBM's share in the US market shrank in the third

quarter.

Global PC market leader Compaq Computer Corp. held onto its top position with

13.1 per cent of the total market. Executives from Dell Computer Corp. have said

they were on a path to steal the No. 1 position worldwide from Compaq, ever

since Dell unseated its Texas-based rival in 1999 as the No. 1 PC maker in the

US market.

"I think that would be optimistic," Loverde said when asked about

that happening in the near future. "There's still a good split."

Compaq shipped 4.4 million units worldwide in the third quarter, both

research firms said.

"Compaq grew units approximately 13-14 per cent, which we think is

good," Merrill Lynch analyst Steve Fortuna wrote in a note to clients.

"We remind investors that there are many other areas of business for Compaq

than desktops and notebooks."

Dataquest said that there were some expectations that the home market would

upgrade and replace old computers in the fourth quarter but that the corporate

market would wait until 2001. Thus the fourth quarter might not live up to the

third.

"We suspect these relatively strong numbers in the third quarter reflect

a buildup of channel inventory, and we do not believe the market can support the

kind of growth these numbers would indicate," he said. "The fourth

quarter could show slower unit growth."

However, Loverde said he was "cautiously optimistic" on the fourth

quarter, saying he did not see inventory levels at any level to cause alarm.

Compaq on Friday issued a statement saying it was comfortable with its

inventory levels.

(C) Reuters Limited 2000.