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PC Market Figures Show Compaq, Dell, and HP Lead

Written By: R. Krause
Published On: August 23 2000

PC Market Figures Show Compaq, Dell, and HP Lead
R. Krause - August 23, 2000

Event Summary

Recent figures compiled by IDC show that Compaq Computer Corporation maintains a slim lead over Dell Computer Corporation in worldwide (WW) PC shipments, while Dell extends its lead in the US PC market. Jumping into third place in both US and WW market shares is Hewlett-Packard, whose year-over-year growth rates led all of the major PC manufacturers by a significant margin. Although Gateway's sales and market share increased in the US space, they were leapfrogged by HP. IBM, which exited the retail market late last year, has dropped from third place to fifth.

The growth rate of the worldwide market as a whole was double the US growth rate, indicating continuing softness in the US.

Market Impact

Compaq has recently been trumpeting that their PC group has returned to profitability. Clearly, this is a good thing for them. What is not so good is that its lead in the worldwide market is slipping - if the 1999-2000 trend continues at the same rate, Dell will surpass them in mid-2001. We expect that Compaq will recover slightly, but they must grow faster than the general market (especially in the US) if they want to maintain their lead beyond the end of 2001. Dell owns the US market, and has been growing approximately 20 percentage points faster than the market for the last two years.

While a lot of attention will focus on Dell and Compaq, the big winner here is HP. Their worldwide growth rate was more than double the market's rate, and their US growth was more than five times the market's. A significant portion of this comes from their leadership position in the retail market (ref. TEC Note "HP "Medals" In U.S. PC Olympics"). If HP continues on this trend (we do not expect them to do so), they too will pass Compaq's US position in late 2001.

The other trend - no surprise here - is that PC market consolidation continues for the now-top three vendors. This consolidation is strong in the US, less well defined in the worldwide market. (Our comparison is for 1998-2000 for Dell, Compaq, and HP only; adding IBM - last year's #3 WW - to the mix actually shows consolidation reversing.)

For the longer term, Compaq will need to take serious measures to maintain their lead. A lot of this will depend on their direct sales model finally operating on an approximate par with Dell. HP should continue their current practices, and they'll be breathing down Compaq's neck pretty soon.

User Recommendations

All of the top vendors (the "top three" plus Gateway) produce well-featured machines, but Dell and Hewlett-Packard generally get higher reliability marks, along with Gateway. Compaq still lags in some surveys, especially in the home market.

Although users should not make purchasing decisions based solely on who's leading the pack at the moment, corporate viability should be factored into any purchase decision. Although Compaq is in no danger of going under, their recent market weakness should cause potential customers to ask some tough questions, and perhaps try to improve the terms of any deal.

 
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