Dell Takes Over the #1 Spot in the U.S. PC Market

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Event Summary

Latest figures show that Dell Computer Corporation has now passed Compaq Computer Corporation, and taken the top spot for U.S. PC market share. This is the first time Dell has reached this position for the overall PC market, and symbolizes the leadership fight between Compaq and Dell. The numbers for the market, both US and worldwide, are shown in Tables 1 and 2, below. In addition to gaining the top US spot, Dell has increased its share of the worldwide PC market, and narrowed the gap between itself (at #2) and Compaq (#1).

Market Impact

This means that, after years of trying to catch Compaq, Dell has finally succeeded. With a year-over-year growth rate of 55+% (both US and worldwide), Dell is becoming characterized as a "juggernaut" by some. Its growth rate was 60+% higher than the US market growth rate and 95% higher than the worldwide rate (see Tables below). Overshadowed by Dell's numbers is the fact that market consolidation is continuing: worldwide market share for those not in the top five has dropped by 2.5% overall, but in the U.S. the drop was a stunning 6%. In addition, growth for the top three U.S. vendors far outstripped the market average, but Gateway and H-P are barely keeping up. This hints that the U.S. market will consolidate even faster. We expect the top three vendors (Dell, Compaq, IBM) will have over 50% of the U.S. market by late 2001 (60% probability).

Table 1 - US PC Shipments, 1999 Q2 (Thousands of Units) [Source:IDC]
Q2 1999 Rank Vendor Q2 '99 Ships Market Shr. (%) Q2 '98 Ships Market Shr. (%) Growth 99/98 (%)
1 Dell 1809 16.6 1143 14.3 58
2 Compaq 1798 16.5 1157 14.4 55
3 IBM 876 8.1 511 6.4 71
4 Gateway 845 7.8 623 7.8 36
5 Hewlett Packard 841 7.8 628 7.8 34
  Others 4710 43.3 3952 49.3 19
  All Vendors 10879 100.0 8013 100.0 36

Table 2 - Worldwide PC Shipments, 1999 Q2 (Thousands of Units) [Source:IDC]
Q2 1999 Rank Vendor Q2 '99 Ships Market Shr. (%) Q2 '98 Ships Market Shr. (%) Growth 99/98 (%)
1 Compaq 3754 14.4 2819 13.9 33
2 Dell 2827 10.9 1818 9.0 55
3 IBM 2345 9.0 1671 7.8 40
4 Hewlett Packard 1678 6.4 1239 6.1 35
5 NEC/PB NEC 1283 4.9 1294 6.4 -1
  Others 14152 54.3 11522 56.9 23
  All Vendors 26040 100.0 20266 100.0 28

Although we do not expect Dell to open up a large lead, the current trend of second-time buyers purchasing directly from the manufacturer will help keep Dell on top.

We do not expect Compaq to roll over and play dead - once Compaq's direct-sales business is fully up-and-running (six-nine months - 70% probability), the battle for market leadership will be played on more equal terrain.

User Recommendations

Users should care more about the market consolidation aspect of these numbers than about who is occupying the #1 position. As consolidation continues, there will be less value for users (especially those with large installations) in choosing a company which is getting left behind - in the unforgiving PC marketplace, the also-rans should be viewed as high risk.

However, we believe this can be good news for users. On a more practical level, we believe Compaq may choose to cut prices in order to increase volumes - greatly benefiting larger customers. We also expect Dell to follow, as it has shown a willingness to give super deals to large customers in order to win business.

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