Major PC vendors riding high

Sales rocketed for the big-name PC makers in the second quarter, though the smaller players are hurting.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
3 min read
Low prices and strong economies pushed PC sales past expectations for the second quarter, according to two research houses. Dell (DELL), Compaq, and Hewlett-Packard (HWP) were standouts, while smaller vendors are hurting.

International Data Corporation reported a 19 percent increase in shipments of PCs in the U.S. during the second quarter over the same quarter in 1996, two points higher than expected, said Kevin Hause, an analyst with the company. Meanwhile, Dataquest said that U.S. shipments increased 21.9 percent during the quarter. IDC reported that unit shipments worldwide grew 15 percent, while Dataquest chalked up 17 percent growth. All figures are preliminary.

U.S. PC Shipments
Vendor Q2 1996
Market Share
Q2 1997
Market Share
Percent Growth
Compaq 11.6% 13.5% 38%
11.6% 9.6% -2%
Dell 6.7% 9.3% 64%
IBM 8.3% 8.8% 27%
Hewlett-Packard 5.7% 6.6% 37%
Others 56.1% 52.2% 10%
Source: International Data Corp.

"You saw a lot of pessimism around the PC Expo time frame (which took place in June.) It looked like it would be a horrible summer," said Scott Miller, senior industry analyst at Dataquest. "But fundamental demand is still pretty strong."

"The economy was a key determining factor. Where the economy is going like gangbusters, like in the U.S., sales went like gangbusters. In Japan and Korea, consumers aren't buying as much and businesses aren't investing," said Hause.

The surge in sales, though, comes with its ugly side, especially for manufacturers other than Compaq, IBM (IBM), HP, and Dell.

All four companies increased their market shares during the quarter and exceeded overall sales growth, often by quantum leaps. Compaq, for instance, remained the No. 1 brand in the U.S. and worldwide by growing at roughly twice the rate of the industry as a whole. The Houston-based company grew 38 percent in the U.S. for an 11.6 market share and 42 percent worldwide for a 9.7 percent share, according to IDC.

Worldwide PC Shipments
Vendor Q2 1996
Market Share
Q2 1997
Market Share
Percent Growth
Compaq 9.6% 11.7% 42%
IBM 8.6% 8.8% 20%
Hewlett-Packard 4.1% 5.5% 58.4%
Dell 3.9% 5.3% 61.4%
5.9% 4.9% -1.7%
Others 68% 63.7% 9.7%
Source: Dataquest

Dataquest said that Compaq grew 48.9 percent for a 14.8 percent share domestically and 42 percent for a 11.7 share internationally; shipments were 1.035 million units and 2.2 million units, respectively. IBM, the No. 3 vendor in the U.S. in both polls, grew by approximately 27 percent. Worldwide, the company grew 20 percent for an approximate 8.8 percent worldwide share. The figures for IBM were 632,000 domestic shipments and 1.668 million international.

Dell's unit shipments grew by over 50 percent in both the U.S. and worldwide, according to both polls. And while ranking fifth in the U.S., HP became the No. 3 manufacturer worldwide, with a 48 percent growth and a 4.4 percent market share, according to IDC. Dataquest chalked up a similar surge for HP.

The only top-five manufacturer to experience a decline was Packard Bell, which saw an approximately 2 percent decrease in market share, according to both companies.

PC prices, which were slashed by most manufacturers during the quarter, will continue to drop. The additional manufacturing capacity and efficient manufacturing techniques being deployed by Compaq, HP, IBM, and Dell will also begin to pay off. As a result, the middle manufacturers will have to learn to live off thinner margins, or seek out partners to survive.

"The middle tier is hurting pretty badly. The top tier invested in manufacturing changes. It's not clear that a smaller company can do that sort of thing," Miller said. "Over the next six months we will see if they are able to keep up."

"The guys who will feel the brunt of it are the ASTs and the Digitals" commented Hause, who predicted that exit strategies would start to be played out in public over the next 12 to 18 months.