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Compaq slips again

Compaq Computer remains king of the heap when it comes to PC sales, but its closest rivals are rapidly bridging the gap, according to first-quarter statistics.

Stephen Shankland Former Principal Writer
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Compaq Computer remains king of the heap when it comes to PC sales, but its closest rivals are rapidly bridging the gap.

Compaq earned top rank among PC manufacturers in U.S. sales for the first quarter of 1999, selling 15.7 percent of the 8 million systems shipped, according to market research firm Dataquest. Worldwide, Compaq garnered a 13.4 percent share, Dataquest said.

Nonetheless, Compaq PC market share, U.S. lost 2.1 percent of its domestic share compared to year-ago figures, while archrival Dell gained 3.2 percent, rising from 11.4 to 14.3 percent.

The rest of the top five posted gains as well. No. 3 Gateway went from 8.1 percent to 9.4 percent, No. 4 Hewlett-Packard went from 7.4 percent to 8.5 percent, and No. 5 IBM climbed to 8 from 7.6, Dataquest said in a report to be released tomorrow. All but HP saw growth worldwide.

The market reacted strongly to this and other high-tech news today. IBM's stock surged again, gaining $10.1250 to close at $209.875, another record. Analysts expect IBM to boost its quarterly dividend tomorrow during its annual meeting.

Meanwhile, Hewlett-Packard gained $2.3750 to close at $79.5, Gateway was up $2.9375 to close at 72.43, Dell added $1.8125 to hit $44.812, while Compaq gained just $0.75 to end at $23.875.

International Data Corporation figures for the first quarter were similar.

Compaq's slippage came during a period of significant expansion in the quantity of PCs being shipped. The U.S. market grew 24 percent from the first quarter of 1998 to the first quarter of 1999, according to IDC, but Compaq's growth was a mere 10 percent. Worldwide, sales grew 19 percent, while Compaq saw 16 percent growth, according to IDC.

In comparison, IBM logged domestic growth of 26 percent, HP 39 percent, Gateway 40 percent, and Dell a whopping 55 percent, according to IDC.

The Houston PC maker's eroding position lay at the bottom of recent turmoil that culminated in the ouster of chief executive Eckhard Pfeiffer on April 18. The surprise announcement followed warnings that first-quarter profits would be half of analysts' projections--which Compaq blamed on weakness in the corporate PC market.

IBM was a big winner, according to IDC's Roger Kay. "IBM's recovery doesn't particularly show up in the numbers," because those reflect only unit shipments.

The real PC shipments, U.S. boost to IBM's bottom line is that it sold increasing numbers of notebooks and servers, which are fancier and more profitable machines than desktops. Still, the continuing decline in PC prices has eaten some of the gain from these sales, Kay and others have said.

Although IBM and Dell both gained increasing pieces of the global market share, Dell gained faster and jumped past IBM to take second place. Comparing the first quarters of 1998 and 1999, Dell's market share increased from 7.8 percent to 10 percent, whereas IBM's increased from 8.1 percent to 8.9 percent, according to IDC.

HP did better in the United States than it fared globally. The Palo Alto, California-based company's market share slipped from 6.2 percent to 6 percent on below-average growth of 13.1 percent for its worldwide sales. But stateside, HP's market share leapt from 7.4 percent to 8.5 percent with growth nearly double the industry average. In addition, HP and Dell were the only companies that increased their sales from the strong fourth quarter to the usually weaker first quarter.

HP's growth came primarily in desktop machines, said spokesman Larry Sennett, since the company's portable computer business was in the midst of a product transition.

Apple, meanwhile, had strong iMac and PowerMac G3 sales, with 827,000 computers PC market share, world shipped worldwide, Dataquest said. "Looking forward, future releases of the iMac and the forthcoming consumer portable should allow Apple to remain strong throughout the educational buying season."

The top companies continue to hoard more and more of computer sales as the market consolidates, IDC said. In the first quarter, the top five companies sold 57 percent of all the computers.

U.S. sales grew "dramatically," driven by strong demand for computers aimed at buyers seeking low-cost computers, IDC said. Intel's new Pentium III chip was popular, according to tomorrow's report, but its arrival also spurred demand by driving down prices in the older Pentium II lines.

Growth in Western Europe was "healthy," and Japanese sales "showed all signs that region is rebounding from last year's troubles," IDC said. Dataquest largely concurred, saying that consumer demand in Japan was strong, as was corporate and government demand elsewhere in Asia.

IDC and Dataquest measure somewhat different markets when they compile their statistics. Dataquest doesn't include workstations or PC servers, but IDC does.