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Compaq, Dell, HP lead PC market

Compaq, Dell, HP, and IBM continue to dominate the worldwide PC market, according to major market research firms.

As the top PC vendors continue to make gains at the expense of lesser players, the worldwide market for personal computers continued on its upward trajectory in 1997 even as economic woes hit Asian markets, according to new reports from market research firms International Data Corp. (IDC) and Dataquest.

Worldwide PC factory shipments rose 14 percent over the fourth quarter of 1996, and 21 percent sequentially over the third quarter of 1997, according to IDC. In the US, PC shipments grew 15 percent over last year, and 6 percent sequentially.

For the full year 1997, worldwide PC factory shipments grew 15 percent over 1996 to about 80 million units, and US factory shipments increased 19 percent over the previous year to about 32 million, IDC said.

Dataquest showed worldwide PC shipments topping 82 million units in 1997, an increase of nearly 16 percent over 1996. Dataquest?s growth rate for the U.S was about 21 percent at 31 million units.

"Each quarter of 1997 witnessed the continuous consolidation of market presence by an elite few PC manufacturers," said Bill Schaub, vice president of Dataquest's Personal Computing and Peripherals group. "During the course of 1997, the top 4 manufacturers captured almost 70 percent of PC unit growth worldwide, with Compaq seizing nearly 30 percent of that total expansion."

In the fourth quarter of 1997, No.1 Compaq continued to show strength backed by gains in manufacturing and distribution efficiencies and the continued success of its sub-$1000 systems, according to IDC.

IBM held onto the No.2 spot worldwide, doing well in Western Europe and Asian regions. Commercial desktops and servers continue to drive growth, as well as a renewed focus on inventory management. IBM also introduced its first low-cost consumer PC last quarter. These factors allowed it to post 42 percent sequential growth worldwide, IDC said.

Dell continues to show the high growth rates, year-to-year, according to IDC, with a ranking of No.2 in the U.S. market, and No.4 worldwide. Hewlett-Packard was another big winner during the quarter, growing worldwide unit shipments in excess of 69 percent. "The company found growth outside of the US with their Pavilion consumer PCs as they capitalized on strong consumer demand in Western Europe. The company's portables also continue to show progress," according to IDC.

Unsurprisingly, both the IDC and Dataquest reports put Compaq Computer (CPQ ) at the top of the charts in both U.S. and worldwide shipments for the whole of 1997. Compaq recorded 42.4 percent growth worldwide from 1996 to 1997 for a 12.4 percent marketshare, according to preliminary estimates from Dataquest.

Compared to 1996, Compaq was able to gain two percent market share over rival IBM (IBM ) worldwide, which was second with 8.8 percent marketshare, according to Dataquest.

Dell Computer (DE LL), Hewlett-Packard (HWP), and Packard Bell-NEC rounded out the top five vendors, matching IDC's worldwide rankings for 1997.

"It's unbelievable that Compaq continues to pull so far ahead of everybody," says Dataquest?s Schaub. With so much of the growth centered in the U.S. and European markets, power is concentrated in a fewer people's hands now, he says.

Meanwhile, in the U.S. market, IDC says Dell was the No.2 PC vendor last year, displacing Packard Bell-NEC. Packard Bell's drop to third place was the result of an 8 percent decline in PC shipments from 1996. IBM and Gateway 2000 (GTW ) finished fourth and fifth, respectively.

According to John Brown, manager of IDC's worldwide quarterly PC Market Tracker Program, Packard Bell-NEC was hit hard in retail stores by Compaq's assault on the sub-$1,000 PC market. On the corporate side, Brown says IS managers continue to hesitate to put NEC on their vendor lists.

1998 may not bring much better news for Packard Bell-NEC. During the fourth quarter of 1997 in the U.S. market, Packard Bell-NEC continued its slide downward, landing in fifth place overall with eight percent market share. That compares to a second place finish last year with 10.3 percent marketshare.

On the other hand, Gateway 2000 capitalized on strong consumer demand for its systems to push HP off the list and settle in as the fourth largest vendor, registering 45 percent growth over the same quarter a year ago. It was the first time Gateway 2000 had reappeared on the top five list in several quarters, according to Brown.

For those vendors outside of the select few over-achievers, growth was a modest 8 percent, both reports said.

That news doesn't bode well for Japanese and Korean companies with a stake in the U.S. PC market such as NEC and Samsung (with its investment in struggling AST), who have not fared well of late.

Other foreign multinational companies wishing to be a contender in the worldwide PC market face a different business model than many are used to. U.S. PC makers are selling ever increasing numbers of low-priced systems, where many foreign PC vendors are still used to dominating their respective markets even while selling products with high profit margins.

"The PC business is one of return on investment. Its not a business today of gross margins," Schaub says. Growth and profit will come from moving PCs into customer's hands more quickly than competitors, not from selling high-profit systems.