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PC market stops declining, for now

update Worldwide shipments grow year over year in the third quarter, the first increase after five straight quarters of declines. New leader Dell is happy, but...

update The PC market is far from healthy, but for the moment, at least, it has stopped shrinking.

PC shipments worldwide grew by 3.8 percent in the third quarter compared with the same period a year ago, according to IDC, the first increase after five straight quarters of year-to-year declines. A small increase may occur in the fourth quarter as well, the market researcher added.

The latest quarter also marked the return of Dell Computer to the top of the PC pile. The company surpassed Hewlett-Packard, which became the top PC maker in worldwide shipments last quarter, owing to its acquisition of Compaq Computer.

The recent gain in PC shipments isn't cause for too much celebration, however. PC shipments grew by only 6 percent from the second quarter--lower than the historical average of 9.2 percent. Growth from the third quarter to the fourth also is expected to be in the single digits and below historical levels. Intel and Apple Computer warned earlier this week that fourth-quarter sales could be flat to slightly higher.

Research company Gartner Dataquest said shipments in the third quarter rose 5.8 percent worldwide. However, if the disruption caused by the Sept. 11 terrorist attacks is factored into last year's numbers, year-over-year sales were flat, the company said.

"The seasonal pattern (of shipment increases) is there, but it's much more muted than usual," said Roger Kay, an analyst at IDC.

Even if the industry growth spurt is short-lived, the third-quarter numbers continued to underscore Dell's growing dominance in PCs. The Austin, Texas-based PC maker accounted for 16 percent of the desktops, notebooks and Intel- and AMD-based servers shipped during the quarter. Dell saw its worldwide shipments grow by 23 percent worldwide compared with the same period a year ago, according to IDC.

In contrast, HP's shipments shrunk by 4.9 percent, leaving it with a 15.5 percent market share. The two companies combined shipped about 10 million PCs, but Dell shipped 200,000 more, said Kay.

Gartner Dataquest's data showed Dell and HP neck and neck, separated by a tenth of a point with market shares of 15.8 percent and 15.7 percent, respectively. A tenth of a point represents about 30,000 units, Gartner Dataquest said.

The stateside saga
In the United States, Dell continued to expand its already sizable margin. The company grew shipments by 29 percent to capture 29.4 percent of the U.S. market, according to IDC. HP's U.S. shipments fell by 2 percent to give it a 19 percent market share. All told, the U.S. market grew by 6 percent, slightly higher than the worldwide figure.

HP executives argued that the two companies' third-quarter market shares are a tie and suggested it might be more accurate to look only at desktop and notebook shipments, eliminating servers from the picture, to declare the king of PCs. Servers, however, generally are more profitable than desktops or notebooks and long have been part of the quarterly tabulations.

"We are talking a couple of points of difference. It clearly shows we're getting momentum back and starting to grow again. We're taking market share back, and we're clearly a force to be reckoned with, going forward," said Jim McDonnell, vice president of marketing and sales at HP's Personal Systems Group. "The disappointment in this is that it's so close."

HP recently has dropped prices on products such as notebooks to compete more aggressively with Dell. The move has analysts predicting a close race between the two giants in the future.

"HP is likely to resume the lead in the fourth quarter, because it has such a strong (presence) in the home PC market," said Todd Kort, an analyst with Gartner. But Dell is expected to take the lead for good in 2003 because of its momentum, Kort said.

Dell's market share gains came largely in the United States, Kay said.

"Dell's year-over-year growth in the United States was in the double digits," Kay said. "It also did OK in Japan, but it had a less spectacular performance in other markets."

Meanwhile, "HP did better than we expected them to do...also gaining share in the U.S.," thanks to consumer sales, Kay said.

Ranking a distant third after HP and Dell was IBM with 6 percent of the worldwide market. The company shipped just less than 2 million units during the quarter, a 2.2 percent year-over-year decline, according to IDC.

Fujitsu-Siemens and NEC rounded out the top five worldwide with market shares of 4.3 percent and 3.3 percent, respectively. Fujitsu-Siemens grew shipments by 8 percent while NEC grew shipments by 15 percent.

In the United States, Gateway finished with 6 percent of the market. The company saw shipments decline by 10.8 percent. IBM finished fourth with a 5.4 percent market share and a 5.5 percent decline in shipments year-over-year. Apple also saw market share decline in the United States, from 4.3 percent of the market in the third quarter of 2001 to 3.8 percent this past quarter. The company was hurt by increased competition in the U.S. marketplace.