Dell Computer Corp.
The Wall Street Journal -- October 26, 1998 (2:13 AM)
Technology:
PC Demand Is Offset by Shrinking Prices
----
By Jim Carlton
Staff Reporter of The Wall Street Journal
Strong demand in Europe and the U.S. propped up personal-computer
shipments in the third quarter, but produced little overall revenue
gains for the industry because of sinking prices.
International Data Corp., a market researcher based in Framingham,
Mass., estimated in a report issued Friday that world-wide shipments
of PCs increased 15% from the same quarter a year ago. That is more
than double the 7% increase IDC reported for the second quarter of
this year, a contentious estimate that some PC makers believed
undercounted actual shipments. Rival researcher Dataquest, a San
Jose, Calif., unit of Gartner Group Inc., had reported a 13.9% second-
quarter gain, and said Friday that global shipments in the third
quarter increased 13.7% from the year-earlier level.
"Demand for PCs is as strong as ever," said Bill Schaub, Dataquest's
vice president of personal computing. "There are still lots of places
for PCs to go in the world." Dataquest expects total 1998 shipments
to increase 14% from the previous year, while IDC predicts an 11%
jump.
Both researchers, however, warned that pricing pressures will
continue, with each predicting little or no increase in world-wide
revenue this year. In the past two years, the average selling price
of a PC has plunged to $1,100 from about $2,000. And prices are
expected to fall still further because of price wars between Intel
Corp. and its rivals in microprocessors. (Indeed, Intel and Advanced
Micro Devices Inc. are expected to cut prices of their
microprocessors at least 20% to 30% this week.
The third-quarter data also show that the industry continues a
consolidation, as the biggest PC makers seize more market share from
smaller ones. Dataquest estimates that market leader Compaq Computer
Corp. and the other top four companies -- International Business
Machines Corp., Dell Computer Corp., Hewlett-Packard Co. and Gateway
Inc. -- accounted for about 41% of all shipments, compared with 37%
at the same time a year ago. Dell, in particular, showed blistering
growth.
The relatively strong demand is a bright spot in an industry that has
been beset for much of the year by woes ranging from the onslaught of
sub-$1,000 computers, which place pressure on the profit margins of
the entire supply chain, to inventory gluts among vendors trying to
move to more efficient manufacturing techniques. Demand, meanwhile,
has fallen sharply in Japan and other parts of economically ravaged
Asia.
However, falling PC prices ignited third-quarter sales in most
regions, including Asia. In the Japanese market, for example, IDC
reported "some positive growth" for the first time in a year. While
analysts caution it is too early to predict a revival, they say the
results might indicate that the PC industry's troubles in Japan have
bottomed out.
For the same reason, U.S. and European markets enjoyed surprising
resiliency. According to IDC, shipments in Europe were at a year-over-
year growth rate of about 20% in the third quarter, while the U.S.
grew 14%. Dataquest reported the U.S. jump at 18%. "After Asia fell
down, we have seen the U.S. and Western Europe step up to provide the
needed growth," said John Brown, IDC's manager of world-wide
quarterly PC tracking.
H-P reported that its Pavilion consumer line, for instance, is
growing at a twofold annual rate. Officials of Compaq said they were
"extremely pleased" with the third-quarter sales of their Presario
consumer line, while analysts cite IBM's new lineup of sub-$1,000
Aptivas as a key factor behind its brisk retail sales. "One clear
trend is there was a hell of a back-to-school season," says a
spokesman for H-P, based in Palo Alto, Calif.
The other trend in the quarter was a reduction in inventories.
Compaq, for example, said its level of unsold inventory was reduced
to an average of three weeks in the third quarter from 3.5 weeks in
the second period. Analysts say the level was nearly two months early
in the year.
In working down those inventories, Houston-based Compaq's unit sales
grew just 9.7% from the year-ago quarter, causing its global market
share to dip to 13.7% from 14.2%, according to Dataquest. Compaq
officials say, however, that they intentionally slowed shipments to
reduce inventories. They add that a more accurate gauge of the
company's health is its 38% increase in the quarter from the year
before in products actually sold to customers.
"We are very pleased with that trend," said Enrico Pesatori, Compaq's
senior vice president of corporate marketing.
Dell, meanwhile, continued its torrid pace, increasing shipments in
the quarter 61% from the same time a year ago, according to
Dataquest. The Austin, Texas, manufacturer is now ranked No. 3 in the
world and No. 2 in the U.S. "There's no stopping them right now,"
IDC's Mr. Brown said.
Others in the top five posted impressive results. IBM's shipments
grew 24%, according to Dataquest, while H-P increased its shipments
19% and Gateway jumped 38%. Indeed, Gateway vaulted into the top five
for the first time, as Packard Bell NEC Inc. fell off Dataquest's
list.
The market researchers did not have a world ranking for Apple
Computer Inc., but that company's recent resurgence led to an
increase in its U.S. market share to 5% from 4.4% a year ago,
according to IDC.
---
PC Sales Resume Strong Growth
Preliminary world-wide PC vendor shipment estimates for third-
quarter 1998
------- THIRD QUARTER 1998 -------
SHIPMENTS GROWTH FROM MARKET 3RD QTR. '97
COMPANY (IN THOUSANDS) YEAR AGO SHARE MARKET SHARE
Compaq 3,100 +9.7% 13.7% 14.2%
IBM 1,945 +23.9 8.6 7.9
Dell 1,895 +61.0 8.4 5.9
Hewlett-Packard 1,373 +19.3 6.1 5.8
Gateway 877 +37.5 3.9 3.2
Others 13,423 +7.2 59.4 63.0
Total Market 22,613 +13.7 100.0 100.0
Source: Dataquest
(thanks to Margie) |
