PC sales growth may have peaked, group says

A new research report predicts PC sales will slow after record growth in 1999.

4 min read
The last year of the millennium may also be the last year for explosive PC sales.

Market research firm International Data Corp. (IDC) today released its final tally of PC shipments for 1999--in many respects a record year--and also its forecast for the first quarter of 2000. While growth is expected to be good this year, the glory days of 40 percent or more quarterly growth are over, IDC says.

"We noticed from the growth we're seeing from the first quarter that things are starting to get back to a normal cycle," said IDC analyst John Brown. "The growth rates are going to be pretty good, but nothing like the high growth we saw every quarter last year."

Worldwide PC shipments last year grew 23 percent over the previous year and 24 percent in the United States. But some computer manufacturers and market segments saw phenomenal growth that may have passed with the century.

Still, the industry is looking at growth in the 20 percent range, prompted in part by Windows 2000, Microsoft's latest operating system.

Consumer PC sales, for example, were 40.3 percent higher during the first quarter of 1999 than the same period a year earlier. Growth climbed to 56.3 percent and 43.1 percent, respectively, during the second and third quarters.

Dell Computer and Hewlett-Packard ended the year strongly, in the United States respectively gaining 53 percent and 64 percent from the fourth quarter of 1998. The two PC makers also led the quarter in worldwide sales, with Dell's PC shipments growing 45 percent year-over-year and HP up 49 percent.

Round Rock, Texas-based Dell, which last year captured the U.S. sales crown from Compaq Computer, posted the highest growth of any PC maker--56 percent at home and 53 percent worldwide, for the year.

HP followed Dell, with 40 percent growth in the United States and 32 percent worldwide. While Compaq managed 19 percent growth for both regions, it posted only modest gains for the fourth quarter--4 percent here and 9 percent worldwide.

IDC predicted a general overall slowing of PC shipments in 2000, following a modestly strong fourth quarter. U.S. PC shipments during the fourth quarter grew 16 percent year-over-year and 20 percent worldwide.

Others, however, are more optimistic. After a slow start, the quarter seems to be progressing well. Windows 2000, meanwhile, will fuel sales down the line.

"We've seen a pickup in sales (for PC companies) since the Windows 2000 launch, and there will be more momentum from that as the year progresses," Dan Niles, an analyst at Robertson Stephens, said last week. "That means the stocks will also perform better as the year goes on."

During the quarter, Dell led 1999 US PC shipments in the United States, with 17 percent market share followed closely by Compaq at 16.3 percent. HP's 10.3 percent share, Gateway's 9.3 percent and IBM's 6 percent rounded out the top five.

Compaq captured the top spot in worldwide PC shipments with 13.7 percent market share, compared with 10 percent for Dell. IBM and HP tied at 7.4 percent, followed by Fujitsu Siemens at 5.1 percent.

For the first quarter of 2000, IDC predicted PC shipments in the United States will grow a healthy 20 percent over a year earlier, but Asia-Pacific will do better, with 32 percent growth.

The Asia-Pacific region will benefit from strong consumer demand, up 68 percent overall and 45 percent in Japan.

Sales gains in Europe are expected to be more modest, with only 10.9 percent growth year-over-year but a 22 percent decline from the fourth quarter.

The U.S. market also will decline from the fourth quarter, about 9 percent, but gain momentum as the availability of processors and memory chips improves, IDC predicted. In January, PC prices increased for the fourth month, in part due to component shortages.

Dell, Gateway, Hewlett-Packard 1999 global PC shipments and Apple are expected to see strong growth, while Compaq Computer and IBM face hard times, according to IDC.

Compaq's challenges include Dell's direct sales and increasing pressure from HP at retail. But Compaq is not out of the race by any means, Brown said. "They're in this transition, and it's going to take a little time."

IBM's ongoing PC losses could continue, as the Armonk, N.Y.-based computer maker regroups, taking sales direct and launching a new PC line next month.

"IBM's taken some major risk going direct, literally overnight, without any transition, and that could take its toll," Brown said.

During the fourth quarter, IBM's sales dropped 29 percent in the United States and 7 percent worldwide. IDC did not predict any major shakeout among the market leaders, other than some potential shifting of positions. For 1999, Dell captured the top spot in the United States with 17 percent market share vs. 16.1 percent for Compaq and 8.9 percent for Gateway. Worldwide, Compaq beat Dell, with 13.9 percent vs. 10.5 percent market share.