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HP takes lead in consumer PC sales

Hewlett-Packard execs credit the company's gains to strong retails sales and the debut of Windows XP. But it faces a tough competitor: Dell.

Hewlett-Packard PCs were a holiday favorite among consumers worldwide in 2001.

While the overall PC market declined by 6.1 percent during the calendar fourth quarter, HP's consumer PC sales increased, according to IDC. The computer company took the No. 1 spot in the worldwide consumer PC market during the quarter, shipping 10.6 percent of all desktop and notebook units worldwide.

HP executives said the company's fourth-quarter unit sales were up 42 percent from the torpid third quarter of 2001, thanks to a rebound in consumer spending in Europe and North America.

Compaq Computer and Dell Computer followed closely with 9.1 percent and 8.9 percent of the worldwide market, respectively, but were unable to match HP's retail sales growth. Meanwhile, Fujitsu Siemens was fourth with 6.1 percent of the market, according to IDC.

HP executives credited the company's gains to a changing competitive landscape, strong retails sales, new technologies, such as DVD-R (DVD recordable) drives, and the debut of the Windows XP operating system.

HP went into the quarter conservatively, but "our products sold well. The retail channel seemed to re-energize in the fourth quarter, and we were able to benefit from that," said Sam Szteinbaum, general manager of HP's consumer computer business in North America.

HP gained in part from being at the right place at the right time in the fourth quarter, when Gateway pulled out of the European market and consumers flocked to retail stores in greater numbers to buy PCs for the holidays, prompting a fourth-quarter consumer PC resurgence.

However, IDC also credited the gains to HP's renewed consumer focus, its ability to package its PCs into bundles that interest buyers and strong management of its retail business, especially in inventory.

HP "refocused and benefited from some of the rebound after the third quarter at retail" stores, said Loren Loverde, director of IDC's PC Tracker service. Its success in the fourth quarter came from the company's ability to recognize pent-up demand, to promote itself, and take advantage of its presence in retail stores. Some of the other computer manufacturers do not sell their products in retail stores.

Though HP has been steadily gaining in consumer PCs over the past few years--particularly in notebooks--it faces a tough competitor in Dell, Loverde said.

Dell, which does not sell its computers at retail stores, is a popular choice among second- and third-time consumer PC buyers, and its lack of retail presence is becoming "less and less important," Loverde said.

"What's happening is that the base of that type of (more sophisticated) user is growing," he said. As a result, Dell "is definitely going to increase the competition in the segment" in coming quarters.

With concerns about future growth, competition from Dell, and HP's proposed merger with Compaq, HP faces a number of hurdles, Loverde said.

But the overall consumer PC market is expected to remain strong despite the setbacks of 2001, and "there's potential for a lot of growth," he said.

HP will work to continue to expand its consumer sales by adding new features, such as incorporating its DVD+RW drives (the company's DVD-rewritable product) across its PC line as the technology comes down in price, Szteinbaum said. The company will also focus on digital imaging, music and movies.