It's Toshiba by a nose in notebook race

Toshiba, with help from Japan, has a quarter to remember. It took back the top spot in the notebook PC market from rival Dell, whose notebook sales shrank 4 percent.

John G. Spooner Staff Writer, CNET News.com
John Spooner
covers the PC market, chips and automotive technology.
John G. Spooner
4 min read
Toshiba dethroned Dell Computer as the biggest seller of notebook PCs in the first quarter of this year, thanks to huge gains in the Japanese market.

The Japanese company, which at one time dominated the notebook PC market before losing out to Dell, had a quarter to remember. The notebook maker took advantage of higher unit sales in Japan and the United States as well as a smaller-than-normal decline in overall quarterly unit sales for the market.

Toshiba increased its worldwide unit sales by 19.3 percent sequentially from the fourth quarter of 2001, according to researcher IDC. The company claimed 14.4 percent of the worldwide notebook market.

Dell's notebook sales, meanwhile, shrank 4 percent sequentially. The PC maker was also hurt by slow overall sales to large corporations. In addition, despite aggressively targeting consumers, Dell had no retail presence and a relatively small spot in the hot Japanese market, where it ranked No. 9 with a 2.4 percent market share. As a result, Dell slipped into the No. 2 spot with 13.2 percent of the market during the quarter, IDC said.

Notebooks are becoming increasingly important to PC markers as sales of portable computers rise. Notebooks accounted for just 17.6 percent of the total PC market in the first quarter of 1998. But by the first quarter of this year, notebook sales doubled from 3.6 million to 7.2 million machines and increased to 23.8 percent of the market, according to IDC.

The Japanese notebook market skyrocketed during the first three months of this year, which is traditionally its strongest quarter, IDC said. Sales at U.S. retail outlets--another area where Toshiba is strong--likewise sizzled. Topping it all off, unit sales of notebooks worldwide stayed the same as in the fourth quarter, allowing Toshiba, Dell and Sony to sell more notebooks than in previous years. Normally, sales decline by about 10 percent in the first quarter.

The company's successes came mostly from its performance in Japan, said Alan Promisel, notebook analyst at IDC. Toshiba is No. 4 in the Japanese market with 13 percent.

"Toshiba was up 64 percent sequentially in the Japanese market, and Sony was up 24 percent," Promisel said. "Also, the U.S. retail market has been very strong recently. Sony and Toshiba have extremely strong retail presences."

But Toshiba's first-quarter gains were also "a little uncertain, because a lot of the (first-quarter) strength is from the Japanese market," he said. Unlike the United States, where fourth-quarter sales are strongest, most of the growth in Japanese notebook sales comes in the first quarter.

At the same time, Dell "did what it always does. It remained consistent where Sony and Toshiba outperformed," Promisel said. "It's possible Dell will quickly retake the No. 1 spot again. But then again Toshiba definitely has commercial penetration at large corporations," meaning it could hold on to the gains it made, Promisel added.

Waiting for a corporate rebound
The return of corporations to the market will be a key factor for both companies continued success in notebooks. A recent Merrill Lynch study indicates that although some corporations will begin buying computers again in volume this year, the majority won't begin buying new PCs until next year. As companies begin buying PCs again, IDC predicts they will buy more notebooks than before.

Meanwhile, a competitor that could knock both Dell and Toshiba off the top spots may be waiting in the wings. Hewlett-Packard, which inherited Compaq Computer's notebook business when it acquired the company, could combine its own share with Compaq's to take the top spot. Despite a decline in first-quarter unit sales of 13 percent, Compaq was the No. 3 notebook seller worldwide with a 10.4 percent share of the market.

HP executives say the company is the No. 1 PC seller. But analysts say it will take at least a couple of quarters for the market to shake out as the company tweaks its product lines and marketing strategies.

Elsewhere on the notebook front, Sony had a quarter similar to Toshiba's, growing 11.7 percent to capture 8.9 percent of the market. The company also enjoyed strength in Japan and at U.S. retail outlets. IBM followed Sony with 8.4 percent of the market. Its unit sales fell 11.8 percent during the quarter.

Unit sales in the United States presented a similar picture. Overall, unit sales were down 10 percent, although Toshiba and Sony were up 1.8 percent and 5.1 percent, respectively. Dell declined 4.4 percent.

Dell maintained its No. 1 spot in the United States, though, with 25.2 percent of the market. Toshiba was No. 2 U.S., claiming 13.6 percent of the market.

Compaq suffered a 20 percent decline from the fourth quarter to capture 11.7 percent of the market and third place. Sony was fourth with 10.3 percent of the market, and IBM was fifth with 9.7 percent.

Overall, shipments of desktops, notebooks and Intel-based servers declined 2.7 percent worldwide and just 0.4 percent in the United States during the first quarter from the same period a year ago, according to IDC. From the fourth quarter of 2001 to the first quarter of this year, worldwide shipments dropped 8.9 percent worldwide and 6.1 percent in the United States.

Worldwide, Dell was the only major PC company to increase market share during the quarter. The PC maker claimed 15.4 percent of the worldwide market and 28.4 percent in the United States, IDC said.

IDC predicted that PC unit sales will increase by about 3 percent in 2002, after unit sales declined by a little more than 5 percent in 2001.