Meat Loaf dies at 74 Intel's $100B chip 'megafab' Twitter will showcase your NFTs Netflix confirms Squid Game season 2 Free COVID-19 test kits Wordle tips

Dell topples Compaq in U.S. market share

Longtime market-share leader Compaq Computer falls out of the top spot, at least in the United States.

Dell Computer has pushed aside Compaq Computer for the top spot in PC market share--at least in the United States.

The so-called direct sales PC manufacturer has stolen the leading role in the world?s largest market away from the longtime front-runner for the first time, according to studies to be released today by market research firms International Data Corporation and Dataquest.

Dell edged out Compaq in the U.S., according

Dell surges in U.S. market
Dell Computer had a larger share of the computer market than rival Compaq in the third quarter. Here's how the market broke down.
Company 3Q '99 Market share 3Q '98 Rank (and share)
1. Dell 17.1% 2. (13.4%)
2. Compaq 15.3% 1. (15.0%)
3. Gateway 9.3% 5. (8.2%)
4. HP 8.2% 4. (8.4%)
5. IBM 7.6% 3. (8.9%)
Source: Dataquest
to final second-quarter numbers released by IDC last month. But Dell widened the margin in the third quarter, grabbing the top spot for the first time from both market-research firms.

Compaq held on to the No. 1 spot worldwide, but analysts predicted that Dell soon would push its Texas rival aside in that category too.

More broadly, third 1999?s third-quarter statistics read like Exhibit A for the direct sales method. Dell grew more than two times faster than both the U.S. and worldwide markets, while Gateway clipped along at more than 1.5 times the market.

By contrast, Compaq and Hewlett-Packard about kept pace with the entire PC market while IBM grew about half as fast, in terms of the number of computers shipped. All three companies continue to sell a substantial number of PCs through retailers and resellers. Two years ago, many of the traditional manufacturers were growing at faster than the market.

The news comes on the eve of Compaq's third-quarter earnings announcement. The company is expected to report a 5 cent per-share profit, or $85 million, according to a consensus estimate by First Call. That estimate is before about a $900 million charge for restructuring, which includes up to 8,000 employee layoffs and facility closings.

In the United States, Dell shipped about 2 million of the 11.7 million PCs sold in the third calendar quarter, giving the Round Rock, Texas, company a market share of 17.1 percent, Dataquest said. Compaq, with 1.8 million computers shipped, had 15.3 percent of the market.

"They are No. 1, finally. Last quarter, it was kind of a virtual tie between the two. This time, it's for real," said IDC analyst John Brown.

"Dell has been putting its product portfolio together piece by piece, expanding on manufacturing efficiencies, and working on its Web delivery. They've been slowly putting each stone in place, and they've built a pretty solid house over there."

For its part, Compaq has been hurt by transitions in management and its portable computer lineup, Brown added.

Compaq's slip to the number two rank "was expected, but may spook some," said Morgan Stanley Dean Witter analyst Gillian Munson in a report Friday.

The next finishers were IBM, Hewlett-Packard, and Gateway, with 7.6 percent, 6.2 percent, and 4.3 percent of the U.S. market, respectively, according to Dataquest.

Worldwide, Compaq retained the top spot with 13.8 percent of the 15.3 million computers shipped, but its growth rate of 20 percent was less than the overall market growth of 25 percent, according to IDC. Dell's growth, by comparison, was 59 percent. IDC's numbers vary from Dataquest?s because IDC counts so-called PC servers into the total while Dataquest does not.

The direct sellers outgrew those whose PC sales come primarily through stores, the figures show. Direct sellers Dell and Gateway saw worldwide sales grow 62 percent and 40 percent respectively, according to Dataquest. HP and Compaq, not predominantly direct sellers, had growth of 30 and 18 percent, respectively, where as IBM, with almost no direct sales, had growth of 12 percent.

"Slower growth rates from the traditionally indirect vendors Compaq, HP, and IBM point toward a renewed focus on profitability rather than market share at any cost," said Dataquest's Charles Smulders in a statement.

All the PC makers, and Dell

Compaq still tops internationally
Compaq maintained the lead in international market share.
Company 3Q '99 Market share 3Q '98 Rank (and share)
1. Compaq 12.8% 1. (13.4%)
2. Dell 10.8% 3. (8.2%)
3. IBM 7.6% 2. (8.4%)
4. HP 6.2% 4. (5.9%)
5. Gateway 4.3% 5. (3.8%)
Source: Dataquest
in particular, were hurt by rising memory prices. "Clearly a business environment where component prices rise does not fit the high velocity business model used in the PC industry," said Smulders.

Nonetheless, IDC pointed out that HP's growth was sustained by sales of its retail Pavillion line. One of the hallmarks of HP's retail line is its low cost. The company's hottest-selling computers typically sell for less than $800, according to monthly polls from PC Data. Compaq and HP also enjoyed growth because of ISP rebate deals.

"The fight isn't over. I'm sure they're going to give it a thrill next quarter," Brown said. "Compaq does play in the retail market, and it is a retail quarter."

Apple also has cheery prospects next quarter, largely because of the unfulfilled demand for G4 and iBook computers, Brown said. "They may come in at sixth or seventh place in the U.S., seventh or eighth worldwide. It's definitely something to look for in the fourth quarter," he said.

Packard Bell/NEC isn't doing as well. The company's shipments dropped 6 percent compared to the same quarter the year before, IDC said. "They're being carried by NEC in Japan," Brown said.

IBM and Compaq did very well in Asia, Brown said. However, in the United States, IBM slipped from third place last year to fifth this year as it struggles to figure out how to sell home-oriented machines, IDC said. Last week, IBM announced it would begin to sell almost all its home computers directly to customers instead of through stores.

Among other findings this quarter:

• Asia/Pacific was the fastest-growing region, with 38 percent growth. Japan was second with 37 percent growth, according to IDC.
• Worldwide, 27.9 million PCs, laptops, and servers were shipped in the third quarter of 1999.
• The top five companies accounted for nearly 60 percent of U.S. sales and 45 percent of international sales.