Dell trumps rivals in PC, notebook sales
By Joe Wilcox
Staff Writer, CNET News.com
March 9, 2000, 4:30 a.m. PT
Dell Computer outsold competitors Compaq Computer and IBM during the
fourth quarter, exploiting troubles facing both computer makers, according to
market researcher International Data Corp.
The Round Rock, Texas-based PC maker captured the top spots selling PCs and
notebooks to medium and large businesses, and also posted record growth. IDC
defines medium-sized businesses as 100 to 499 employees and large businesses
as more than 500 workers.
But the market researcher warned there is no
guarantee Dell will continue to dominate these
highly competitive markets.
"Dell has a lot of momentum, that's the bottom
line," said IDC analyst Roger Kay. "Compaq is
still mending itself, and it will be several more
quarters--if things go very well--before they pick
up the same momentum they had before. IBM
faces similar problems.
"Dell, despite their performance, is operating in
an increasingly difficult environment," said Kay,
who pointed to Dell's recent decision to lower its
growth expectations to 30 percent from about
38 percent.
Compaq and IBM face similar challenges as
they move from largely indirect to direct sales
models. Houston-based Compaq is losing
money on every commercial PC it sells, with its commercial computing division
posting losses of $157 million and $79 million, respectively, in the third and
fourth quarters.
Indirect sales rely largely on selling through dealers and prebuilding systems
based on sales estimates rather than Dell's more efficient build-to-order and
ship-direct sales method. Technology Business Research analyst Lindy
Lesperance estimates it costs Compaq twice as much as Dell to build and sell
each commercial PC.
To fix its problems, Compaq this year plans to take 60 percent of its commercial
PC sales direct and has purchased distribution assets from computer distributor
Inacom.
Those changes didn't come fast enough to fend off Dell, with U.S. PC shipments
to medium and large businesses up 57 percent last year and portables increasing
48 percent in 1998.
In the fourth quarter, Dell had 34 percent U.S. PC market share, compared to
Compaq at 18 percent. While Dell posted growth of 40 percent in the medium
and large business segment, Compaq declined 30 percent.
"Clearly Compaq's downward spiral has to do with their transition, and they also
took a hit because of Y2K," said IDC analyst John Brown.
In commercial notebooks, Dell widened its lead over IBM, which plans a major
revamp of its PC division. Armonk, N.Y.-based IBM next month is expected to
unveil a new PC brand and will plan radical changes to its notebook line later in
the year.
For the fourth quarter, Dell had 30 percent U.S. notebook share selling to medium
and large businesses, compared to 18 percent for IBM. But IBM's second-place
ranking is no sure thing for the future, Brown said. Toshiba and Compaq had 14
percent and 12 percent market share, respectively.
"They're all within striking distance of each other," Brown said.
Worldwide, Dell and IBM were much closer--with 19 percent and 17 percent
market share, respectively--for the fourth quarter. With strong sales of the ThinkPad
i Series and ThinkPad 570 combined with changes IBM is making selling systems,
Big Blue could easily close the gap, Brown said.
IBM is also preparing some surprises for Dell on the product front. Later this year,
Big Blue will enhance its notebooks to support Bluetooth and other wireless
technologies, as well as add a multi-purpose connector, code-named Portofino, to
the ThinkPad line. Portofino will support a variety of enhancing peripherals, such
as PC cameras and Bluetooth wireless devices. IBM also plans to radically change
the form of notebooks, including offering a wearable PC.
IBM, like Compaq, has been cranking up its direct sales efforts, increasingly
relying on the Web and planning to sell direct to 14 of its largest customers.
Big Blue is also turning up the heat with corporate extranets--specialized
e-commerce Web sites extending from the computer maker's network to the
customer's--following Dell's success in the same area.
IDC concluded Dell's extranet efforts clearly have paid off, making it easier for
some of its largest customers to buy systems. Through the Web sites, authorized
employees can order systems and peripherals direct from Dell. The method
simplifies the accounting and approval process as well as the ordering.
Both IBM and Compaq have been rapidly building e-commerce extranets for their
customers. As of December, IBM had put about 450 extranets in place for its
largest customers. Get the Story in "Big Picture"
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