New Dataquest/IDC numbers showing DELL surging....
Monday July 26 12:05 AM ET
Compaq, Dell In Close Race For No. 1 U.S. PC Maker
By Eric Auchard
NEW YORK (Reuters) - Dell Computer Corp. (Nasdaq:DELL - news) has capitalized on Compaq Computer Corp.'s (NYSE:CPQ - news) ongoing turmoil to surge into a nearly neck-and-neck tie for No. 1 supplier of personal computers in the United States, but Compaq held on to a generous lead worldwide, recent surveys showed.
The battle for market share took place as global shipments of PCs grew nearly 27 percent to 25 million units during the second quarter, in the wake of a broad recovery in the world's major geographic regions and amid strong consumer PC demand.
Second-quarter market statistics compiled by research firms Dataquest and International Data Corp. (IDC) showed Compaq narrowly retaining its U.S. lead over direct PC supplier Dell -- but only by a fraction of a percentage point.
Dataquest counted Compaq with 16.8 percent of PC shipments in the United States, against Dell's 16.4 percent. IDC put Houston-based Compaq at 16.6 percent versus 16.3 percent for Round Rock, Texas-based Dell. The estimates varied due to slight variations in what the two research groups classify as PCs.
''Dell is actually in a prime position to take advantage of weakness at Compaq,'' said John Brown, a PC industry analyst at Framingham, Mass.-based IDC. ''There is nothing right now to show that Dell is slowing down.''
Dell, the top supplier of direct-from-the-factory, custom-configured PCs, is cashing in on growing demand for direct sales via the Internet. But Compaq has struggled to meet the direct demand while continuing to rely on indirect PC distribution to businesses and through retailers to consumers.
''Everything is going in the right direction for Dell to take advantage of any further slippage at Compaq,'' Brown said, noting Compaq shipped an estimated 1.80 million PCs in the United States in the 1999 second quarter, versus Dell's 1.77 million.
Compaq is working to simplify its distribution strategy but has been distracted by the house cleaning of its top executive team during the past three months, leading analysts to believe that Dell may see further gains heading into the fall.
''Certainly there is the potential for Dell to overtake Compaq in the third quarter,'' Charles Smulders, a PC distribution analyst at Dataquest in San Jose, Calif., said of the battle for the rank of top PC maker.
Still, in the latest quarter, Compaq remained No. 1 worldwide with 13.8 percent of the market, compared with Dell's 10.2 percent, Dataquest said. But the numbers showed strong sequential gains for fast-growing Dell. IDC put Compaq with 14.6 percent globally against Dell's 10.8 percent.
Compaq has been the No. 1 PC maker in the world since 1994, when it swept ahead of International Business Machines Corp. (NYSE:IBM - news) and Apple Computer Inc. (Nasdaq:AAPL - news) from No. 3 in 1993.
Worldwide volume growth was led by the United States, where the market expanded a robust 35.3 percent to 10.8 million units in the latest quarter, driven by a growing fervor for low-cost consumer PCs and ''nearly free'' PCs subsidized by Internet use.
Consumer PC demand swelled the Japanese marketplace, which rang up the highest year-on-year second-quarter growth of any region worldwide, IDC said. Healthy commercial PC sales offset seasonally typical slow consumer demand in Western Europe. Strength in Britain and France met German weakness.
The top five vendors outpaced the industry worldwide by growing in excess of 30 percent -- led by Dell, with better than 50 percent growth, and IBM, with just under 50 percent -- as major brands once again took share from lesser-known names.
The explosive growth in percentage terms was in part due to favorable comparisons with the year-ago second quarter, when leading PC vendors scaled back shipments in order to work off a glut of PC inventory that built up in the first half of 1998.
As a result, shipment growth in the second quarter of 1999 looked higher than the growth in actual sales that occurred to computer users during the quarter.
Filling out the top five spots were International Business Machines Corp., at No. 3 worldwide, followed by Hewlett-Packard Co. (NYSE:HWP - news) at No. 4 and Gateway Inc. (NYSE:GTW - news) at No. 5, Dataquest said. IDC showed Japan's NEC Corp. (Nasdaq:NIPNY - news), with its flagging U.S. unit Packard Bell/NEC, holding the No. 5 spot.
But in the United States, IBM, Gateway and Hewlett-Packard were in a tight battle for the No. 3 spot, the surveys agreed. IBM led here, according to IDC, while Gateway was slightly ahead by Dataquest's count. The differences reflect how IDC counts some computer servers and workstations that Dataquest does not.
The figures tell only a partial story, however, since the industry researcher firms track shipments and not revenues. Tumbling computer prices have cut into the revenue growth, not to mention the profitability of every computer maker.
In response, many PC makers are seeking to make money beyond the PC box itself, roping consumers in with Internet-access offers and by selling accessories like printers and monitors.
Dataquest's Smulders said that while shipments are expected to grow around 18 percent this year, revenues are estimated to rise by a paltry 5 percent -- reflecting sales of low-cost consumer PCs that buoy unit numbers but add little to revenue.
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