Packard Bell plays second fiddle

Packard Bell, the computer company whose meteoric rise to power helped create the home PC market, loses its long-standing top position in the U.S. retail market to Compaq, a study says.

3 min read
Packard Bell, the computer company whose meteoric rise to power helped create the home PC market, has lost its long-standing top position in the U.S. retail market to Compaq Computer (CPQ), according to a new study released today by Computer Intelligence.

Packard Bell's dominance of the home PC market became evident during the past two years when it surpassed Compaq on a shipments-per-quarter basis for the entire U.S. PC market. But the Computer Intelligence study says that Compaq has now definitely overtaken Packard Bell in July as the top vendor in the overall retail market, including the PC superstores, consumer electronic stores, and office superstores where Packard Bell had reigned.

The survey showed that in consumer electronics stores, Packard Bell as recently as February of 1996 had a commanding 41 percent of the market compared to Compaq's 11 percent. Acer had a 16 percent share at that time.

By May, Compaq had gained 5 percent and Acer 4 percent, mostly at the expense of Packard Bell. By July, Compaq had a 21.2 percent market share to 19.3 percent for Packard Bell.

The displacement of Packard Bell from the top spot is an indication that market growth is now being sustained by more choosy second-time buyers instead of consumers buying their first PC, Computer Intelligence analyst Matt Sargent said.

"Where the dominant portion of sales are coming from is second-time buyers. They [read] computer magazines and are well aware of brands. They tend to want name brand machines and add-ons in those types of machines, like the scanners in Hewlett-Packard machines," Sargent added.

But the shift also reflects Packard Bell's own problems with quality and customer support, according to sources at retail outlets. "Their support is no good. Customers call and call and can't get through. That means a lot frustration," said one sales representative at a major retail chain who requested not to be named.

A recent independent study offers support for these claims. The survey ranked companies on their average hold times for customer support calls, and Packard Bell ranked last with an average wait time of 15.7 minutes.

Another issue is that Compaq has aggressively gone after market share with aggressive pricing, although low prices were one of Packard Bell's early advantages, Sargent elaborated. Compaq has matched Packard Bell in price and actually undercut it in May at retail stores across the country.

Computer Intelligence said that if Compaq continues to match Packard Bell in price, Packard Bell will continue to lose market share. The news is not likely to get much better as Toshiba and Sony have entered the consumer desktop PC market for the first time.

"Toshiba is really impressive in its features and design. They've made an exceptional leap into the consumer market. It should have a strong appeal to second-time buyers," Sargent said. He added that Toshiba will be more of a volume competitor for Packard Bell than Sony because Sony is focusing on higher-end machines.

IBM, which is now coming on strong in third place, is also set to introduce tomorrow a new line of Aptiva computers with a futuristic new look, which will likely translate into another hit on Packard's market share. Sargent said that the Aptivas from IBM have already been getting more shelf space in the retail market, and that loyalty and brand-name trust will help fuel more gains for Big Blue.

The end result is that the market will be divided up more evenly, according to Sargent. For Packard Bell, it likely means the end of their dominance in the retail channel and should be a signal that new marketing strategies are needed to restore the company's flagging fortunes.

Dataquest, however, maintains that Packard Bell remains a force at consumer electronics stores where it is still number one.