Dell Overtakes Compaq in PC Sales
Associated Press Online - January 24, 2000 00:01
By CLIFF EDWARDS
marketwatch.newsalert.com
AP Technology Writer
SAN JOSE, Calif. (AP) - Despite concerns about the Y2K problem, personal computer sales surged 22 percent worldwide last year. Domestically, Dell Computer Corp. surpassed rival Compaq Computer Corp. in annual sales for the first time.
Data released Monday by two research firms also indicated that IBM slipped in both worldwide and U.S. sales.
Dell, based in Round Rock, Texas, sold 7.02 million PCs for the year, grabbing a 16 percent share of the U.S. market, up from 12.7 percent in 1998, according to research firm Dataquest, a unit of Gartner Group.
Compaq, based in Houston, sold 6.86 million computers, giving it a 15.7 percent market share, Dataquest said. Compaq's share a year earlier was 16.1 percent. Research firm International Data Corp. also said in a report that Dell finished ahead of Compaq.
Both reports noted, though, that Compaq continues to hold a commanding lead for global sales, with Compaq maintaining a 13 percent share of the international market to Dell's 10 percent.
"This shows Compaq should be looking over its shoulder," said John Brown, IDC research director for PC sales. "Dell, which historically has a flat fourth-quarter, got enough sales over the Internet to keep it in the No.1 position in the U.S. for the year. And that shows people aren't as scared to buy computers off the Internet as they used to be."
Dell's strategy of direct sales has reduced costs and proved to be more efficient that store sales. Dell provides made-to-order computers and is generating more than $30 million in sales a day.
Other companies that keep large inventories are forced to pass on some of those storage costs to consumers or suffer from weaker earnings.
Several major players are hoping to copy the Dell strategy.
There had been concerns that PC sales would slow in 1999 because of the Year 2000 problem, which stems from the longtime practice of using only two digits to represent a year in computer programs and embedded chips. Left uncorrected, "00" could be read as 1900, throwing off some systems and damaging data.
Analysts said that relatively low computer prices, rebate offers and product redesigns helped overcome Y2K-related slowness in the October-December period. Market growth slowed by just 2 percentage points in the quarter because of Y2K, said Dataquest analyst Charles Smulders.
Heavy buying from small to medium businesses, many of them Internet-related companies, also offset a slowing of large corporate purchases, said IDC's Brown.
Among the biggest losers in 1999 in market share were IBM Corp., which both studies found had slipped to fifth place domestically and third worldwide as it pulled its Aptiva line out of traditional brick-and-mortar stores.
NEC Corp. also lost worldwide market share, slipping out of the top five worldwide computer sellers in the IDC study. It pulled the plug on the money-losing Packard Bell line that once was synonymous with home computers.
Direct seller Gateway, with its more than 200 Gateway Country stores, was in the No. 3 spot domestically. Its sales rose 32 percent to boost its percentage of the U.S. market to 9.1 percent, up from 8.4 percent in 1998. Hewlett-Packard's share rose to 8.7 percent from 7.5 percent to give it fourth place. Apple Computer finished sixth domestically and seventh worldwide amid strong sales of its curvy iMacs and iBook laptops, Dataquest reported.
Worldwide PC shipments rose 21.7 percent to 113.5 million units in 1999, Dataquest said. IDC reported a slightly different estimate, putting global PC sales up 23.3 percent at 112.7 million units.
Looking forward, both companies predicted that demand this year will remain heavy in Asia and the United States as a memory chip shortage eases, resulting in continued low prices for relatively powerful PCs.
The low prices also could boost the rate of homes buying second and third desktop PCs or laptops or replacements, analysts said.
"Much will depend on the industry's success in convincing their customers to replace PCs more frequently," Smulders said. "Key factors will be the industry's ability to bring smaller, less complex, cheaper products to the business market and industrially designed products to the home."
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