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Compaq No. 2 in notebooks

Compaq nudges ahead of IBM and into the No. 2 position, but more changes--including price cuts--are likely to come in 1998.

    According to just-released third quarter results of U.S. notebook shipments from International Data Corporation, Toshiba slightly improved upon its shrinking lead over other notebook vendors, while Compaq (CPQ) displaced IBM (IBM) as the second-largest notebook vendor.

    Toshiba garnered 21.2 percent of the U.S. market, compared to 18.6 percent for the second quarter. Compaq nudged ahead of IBM with a 15.7 percent market share, while IBM dropped over two points from the previous quarter to a 12.4 percent market share.

    Dell (DELL) continued its upward march, and has now taken over the No. 4 spot from Acer. Dell only broke into the list of top five vendors in the second quarter.

    For its part, Toshiba appears to have regained some of its footing, although it still missed its third quarter 1996 mark of 26.1 percent market share and is far from its peak of 35 percent. Some industry analysts have attributed Toshiba's woes to the company's foray into the market for consumer desktops, a market the company has since exited.

    Even with a renewed focus, Toshiba and the rest of the top vendors have a serious battle on their hands in 1998, according to International Data Corporation.

    "Without a major operating system upgrade to fuel [corporate] demand, vendors are now eyeing retail for an incremental opportunity," said IDC analyst Randy Giusto. Previously, many vendors had been focused on selling to the corporate market, which can more easily afford to upgrade pricey portables.

    Now, however, vendors are scrambling to open up opportunities in niche markets such as small business owners, students, and owners of multiple PCs, according to Giusto. That means that vendors will have to drive price points lower to bring notebooks to new customers.

    "Toshiba is trying to win back some shelf space in retail. I look to Toshiba getting more aggressive in pricing," he said. "Overall, we think that portable PC prices are going to start marching downward. For small businesses or [those who] work at home, they are going to see some pretty decent configurations for under $2,000," Giusto says.

    In order to retain its No. 2 spot, Compaq will have to continue its push into the retail market. IBM evidently withheld a large number of notebooks for use by its internal sales force, notebooks which could otherwise have been sold to corporate and home users, according to industry sources, and could jump back into the No. 2 spot next quarter.

    In terms of worldwide shipments of notebooks, Toshiba remained the overall leader with 22 percent market share, and IBM placed second with an 11.6 percent market share. Compaq posted the largest gain, climbing 3.2 points from the second quarter to tie IBM at 11.6 percent.