Dell will ship about 8M units of PCs next year. If you assume that by the end of 1998, 50% ship with DVD, and they are all Cube based, (they may offer other options based on competitors) that's 2M units for the year. At $15 ASP = $30M in revenue that analysts haven't added in yet. 75-80% will come in the second 1/2....................................
Product of the year.....................
dell.com
Dell's a grower.......................
zdnet.com
November 03, 1997, Issue: 1082
Section: Business & Finance
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Top PC OEMs lead the way -- Compaq, Dell, and HP extend their global market dominance
By Ismini Scouras
The PC OEMs that have the least exposure to the Asia-Pacific region, a greater mix of products comprising their revenue base, and low desktop prices continued to post healthy results.
They are also the ones that continue to garner more market share, further increasing their dominance in the tier-one territory of the PC market.
"If you look at the top vendors, they are not taking it [market share] away from each other, they are taking it away from the tier-two and tier-three vendors," said Ashok Kumar, an analyst at Loewenbaum & Co. Inc., Austin, Texas.
Kumar added that the top six PC vendors in the Americas market represented 60% of total unit shipments, which reached 8.3 million, compared with 52% in the same period a year ago.
According to the latest PC market report by Dataquest Inc., San Jose, Compaq Computer Corp.'s worldwide market share increased 3% over the same period last year, and unit shipments jumped by nearly 1 million over the third quarter of 1996. Dell Computer Corp. also came out ahead, increasing its share to 6%, compared with 4.3% in the third quarter of 1996.
"Their individual gains are at the expense of most of the other PC manufacturers, with the exception of a resurging Hewlett-Packard," said Charles Smulders, senior industry analyst in Dataquest's Computer Systems and Peripherals group.
Hewlett-Packard Co.'s unit shipments grew 67.9% to 1.125 million, compared with 700,000 a year ago. The Palo Alto, Calif.-based company garnered 5.8% of the worldwide market, compared with 4% in the third quarter of 1996.
The worldwide PC market grew 16.2%, to roughly 20.3 million shipments, while the U.S. PC market jumped 22.9%
"Outside of these three vendors, everybody else, including IBM, is in the single-digit range [of growth]," Kumar said.
IBM Corp. lost global market share in the third quarter, dropping to 8.2% compared with 8.6% last year, according to Data-quest's figures. IBM blamed its weakness on the consumer side of the business. The company didn't expect the consumer market to shift to mid- and lower-priced PCs as quickly as it did.
"What's happening now is the pricing differential and the pricing umbrella that existed between the direct vendors and indirect vendors have compressed," Kumar said, adding that PC OEMs will have to start differentiating themselves through service and support.
Kumar also pointed out that Compaq and Dell were able to increase their shares because of the decline in the average selling price (ASP) of their systems. For example, Compaq's ASPs are declining nearly 20% year-over-year; the average price of Compaq's desktop PC is now at $1,500, while notebook ASPs are averaging $2,000, Kumar said.
Compare that with Gateway 2000 Inc., which sports desktop ASPs of $2,400 and notebook ASPs closer to $3,500, and one can see why Compaq is speeding ahead. "They [Gateway] still have a long way to go," Kumar said. "They are cherry-picking the market to participate in, and that's not going to last for long."
Analysts said that Gateway's exposure to the Asia-Pacific market was one of its weak points. Gateway's sales to that region were down 25% sequentially because of competitive pressures from foreign suppliers. Only 6% of Compaq's sales are derived from the region; Dell's are even less.
Despite lower ASPs of desktops and notebooks, gross-profit margins during the quarter increased for most companies. Analysts said that is related to product mix, as well as to some re-engineering of logistics to enable inventories to remain very low. Compaq, for instance, is sitting on only two or three days of finished goods inventory. "They have been able to realize component price reduction on a real-time basis," Kumar said.
Many PC OEMs have also increased their percentage of sales from higher-priced servers and workstations, resulting in healthy gross-profit margins, analysts said.
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MAJOR OEMs-
Apple
Revenue*: 1,614.0
% change vs. yr. ago: -30.5
Net Income*: (161.0)
% change vs. yr. ago: -744.0
3Q '97 GPM**: 19.8
3Q '96 GPM**: 22.0
Results reflect a $62 million charge to increase restructuring reserves and a $75 million write-off related to the purchase of the Mac OS license from Power Computing.
---
Compaq
Revenue*: 6,474.0
% change vs. yr. ago: 30.9
Net Income*: 517.0
% change vs. yr. ago: 41.6
3Q '97 GPM**: 27.4
3Q '96 GPM**: 26.4
Asset management increased inventory turns from 8.8 to 10.1 and decreased days sales outstanding from 60 to 40.
---
DEC
Revenue*: 2,960.3
% change vs. yr. ago: 1.7
Net Income*: 25.1
% change vs. yr. ago: 138.1
3Q '97 GPM**: 33.5
3Q '96 GPM**: 31.3
Company attributed growth to its server business; Windows NT server growth was driven by Intel-based servers, which grew more than 140% over last year.
---
Gateway 2000
Revenue*: 1,504.9
% change vs. yr. ago: 25.1
Net Income*: (107.1)
% change vs. yr. ago: -276.5
3Q '97 GPM**: 13.0
3Q '96 GPM**: 18.6
Recorded several one-time charges, including $60 million for in-process R&D from the acquisition of Advanced Logic Research and the assets of Amiga Technologies.
---
IBM***
Revenue*: 8,345.0
% change vs. yr. ago: -0.3
Net Income*: n/a
% change vs. yr. ago: n/a
3Q '97 GPM**: 33.8
3Q '96 GPM**: 36.9
Reported ongoing weakness in its consumer-PC business and two of its key server product lines - RS/6000 and AS/400.
---
Micron
Revenue*: 513.1
% change vs. yr. ago: 12.2
Net Income*: 15.0
% change vs. yr. ago: -43.5
3Q '97 GPM**: 16.8
3Q '96 GPM**: 20.7
Acquired NetFRAME Systems Inc.; unit sales in fiscal 1997 benefited from strong demand for the company's PC systems from government and corporate customers.
---
SGI
Revenue*: 768.0
% change vs. yr. ago: 0.3
Net Income*: (55.5)
% change vs. yr. ago: -157.1
3Q '97 GPM**: 43.0
3Q '96 GPM**: 41.1
Reported weakness in its server business, particularly in the United States; incurred an acquisition-related charge of $17 million.
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Sun Micro
Revenue*: 2,098.6
% change vs. yr. ago: 12.9
Net Income*: 108.4
% change vs. yr. ago: -12.1
3Q '97 GPM**: 51.0
3Q '96 GPM**: 47.7
Incurred charges of $52.2 million from the acquisitions of Diba Inc. and Integrity Arts Inc., and a one-time charge of $19.9 million for income taxes.
---
Average %
% change vs. yr. ago: 6.5
% change vs. yr. ago: -150.5
3Q '97 GPM**: 29.8
3Q '96 GPM**: 30.6
---
*In Millions
**Gross-Profit Margin
***Hardware revenue
Copyright (c) 1997 CMP Media Inc.
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