PC sales still down, but not by much

Although PC sales continued to decline in the first quarter, the personal computer market is looking a little heathier, according to new research.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
3 min read
Although PC sales continued to decline in the first quarter, the personal computer market is looking a little healthier, according to new research.

Shipments of desktops, notebooks and Intel-based servers declined only 2.7 percent worldwide and only 0.4 percent in the United States from the same period a year ago, according to research firm 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.

IDC had expected sales to fall by 5.4 percent worldwide on an annual basis. Also, in recent years, sales have tended to drop around 10 percent in the first quarter compared with the fourth quarter.

Rival research firm Gartner said shipments stayed flat worldwide but rose slightly in the United States year over year in the first quarter. Overall, 32.7 million PCs were shipped in the first three months of the year. For the year, Gartner expects PC shipments to increase by 4 percent over a relatively anemic 2001.

"Consumers were surprisingly involved" this past quarter, said Roger Kay, an analyst with IDC. "They were more present in the first quarter than we would normally expect them to be," he said. "The tide is out, and now it's coming back in?We're not expecting a lot of growth this year. Barring something really bad, it should continue to be a slow recovery."

But the PC market won't register sustained, strong growth until corporate buyers begin to replace their aging desktops, according to Gartner analyst Charles Smulders, and it's uncertain when that might occur.

"In developed regions (like the United States and Europe) we're facing saturated markets," he said. "The replacement cycle should begin toward the end of the year, but they can extend it. Will there be (large corporations) choosing to extend the life of their PCs and not replace them until 2003?"

The slight recovery is benefiting some companies more than others. Dell Computer continued to extend its lead over the pack, growing its worldwide market share in the first quarter to 15.4 percent from 12.9 percent a year ago, according to IDC. In the United States, Dell saw its market share grow from 23.7 percent in the first quarter of 2001 to 28.4 percent in the same quarter a year ago, a 19.4 percent increase.

Worldwide, Dell was the only major PC company to grow market share. In the United States, IBM's market share grew by 2 percent, while Hewlett-Packard's increased by a mere 0.4 percent, IDC reported.

Compaq Computer, the No. 2 PC vendor, shrank by 13.1 percent worldwide and by 11.8 percent in the United States, IDC said.

The contrasting growth rates mean that a combined HP and Compaq would be larger than Dell worldwide, but the gap is shrinking, and Dell is expanding faster than the combined group domestically.

"In the U.S., they are two-thirds the size of Dell. Dell is pretty dominant in the U.S." Kay said.

Dell should actually be one of the companies most impacted by the sluggish nature of corporate buying, as the bulk of its sales are to large accounts. The company, however, has a strong reputation for service and can often undersell competitors because of its "build to order" model, Smulders said. By contrast, HP's gains are partly coming in the retail mobile market, where consumers want to touch before they buy.

The more optimistic outlook was presaged earlier this week when Intel said that chip sales were flat from the fourth quarter and Advanced Micro Devices said unit shipments rose slightly. Some of the additional sales, however, went to restocking depleted inventories.

The PC market hit a stumbling block in August 2000 when computer sales fell dramatically below expectations. While the market continued to grow in the third and fourth quarters of that year, the growth rate dropped to single digits, something that hadn't occurred for years.

The market grew slightly in the first quarter of 2001, but the slowdown then accelerated.