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Dell beats Compaq for No. 1 ranking

The company surpasses Compaq in the first quarter to become the world's largest PC maker--the first time the rankings have shifted in about seven years.

Dell Computer surpassed Compaq Computer in the first quarter to become the world's largest PC maker, the first time the rankings have shifted in about seven years.

Dell achieved 12.8 percent market share worldwide in the first quarter, surpassing Compaq for the first time on a worldwide basis, according to figures released from research firm Gartner. Compaq ended the quarter in second place with a 12.1 percent share of the world market.

Along with becoming the largest PC maker, Round Rock, Texas-based Dell re-established itself as the fastest growing--with a vengeance. Dell saw shipments of desktops, notebooks and Intel-based servers grow by 34.3 percent worldwide and 30.7 percent in the United States. Nearly everyone else shrank.

Overall, the industry was sick. PC shipments in the United States declined by 3.5 percent, a historical first, according to Gartner. Worldwide, shipments climbed by 3.5 percent, worse than expected. At the beginning of the quarter, Gartner expected to see 10 percent growth worldwide.

"All in all, the global economy faces considerable downside risks in the months ahead, and just the fear of those risks could dampen PC buying going forward," the firm wrote in a report. Chipmakers Intel and Advanced Micro Devices warned in recent days that second-quarter revenue will drop.

Other researchers had similar projections. "It looks to me like it is still grim, particularly on the consumer side," said Roger Kay, an analyst at IDC, which came to similar conclusions. The market may grow in the second half, "but it will be a very gentle curve, as opposed to a spike. We're not going back to double-digit growth."

PC worldwide sales In contrast to Dell, Compaq saw shipments grow by an anemic 0.3 percent worldwide and decline by 17.9 percent in the United States.

Compaq, though, said the figures don't paint a complete picture of the company's fortunes. It remains No. 1 in Intel-based servers, one of the more profitable subsets of the overall PC market, a company spokesman said.

In addition, Compaq is placing less emphasis on PCs and more on storage, servers and services. Close to 90 percent of the company's profits in the fourth quarter came from those segments.

Hewlett-Packard, which grew faster than Dell during parts of 2000, saw shipments decline globally by 3.5 percent and by 24.7 percent in the United States. Gateway saw domestic shipments drop by 9 percent.

IBM, which had been losing market share, saw business pick up. PC shipments rose by 7 percent for Big Blue, boosting its worldwide market share growth from 6 percent to 6.2 percent. In the United States, IBM's shipments grew by 19.1 percent to move the company from 4.2 percent market share to 5.2 percent. IBM, though, had a weak first quarter in 2000, which made for an easy comparison, said Gartner analyst Todd Kort.

The gap between Dell and the Dell-nots will also increase, he added.

"Dell, being more efficient relative to their competitors, will continue to expand on its lead," Kort said. "The only thing HP, Compaq and IBM can do is invest in their supply chains to become more efficient."

The growth was fueled in part by price cuts Dell imposed starting last December to capture market share. Because of its "build-to-order" production system, Dell also can pass on changes in component costs quicker than competitors. In addition, the company has also cut its profit margin for the sake of increased sales.

At various times in the past three months, for instance, Dell has offered customers free handheld computers with select laptops, free shipping, and free memory upgrades.

Preliminary estimates from Morgan Stanley indicated that Dell would overtake Houston-based Compaq.

Compaq held the lead in worldwide PC sales from 1994 through 2000. IBM was the largest PC company from 1991 to 1994 and for various years in the 1980s. Apple shipped the most in 1990, according to IDC.