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The Starting Line: Market share a squishy topic for tech

As earnings and sales decline sharply, tech companies are claiming market share gains more furiously than usual, but this boasting is often meaningless.

What's a tech company to do when earnings and sales are down sharply from a year ago and it wants to look good?

Try talking some trash about your rivals' market share.

Chatter about market share gains on earnings conference calls are a tech sector staple, but the noise has been turned up a few notches recently.

There's a good reason for that: Earnings stink compared with a year ago. And when companies are faced with year-over-year declines in revenue and earnings, they have to talk about something. Increasingly that something is market share gains, whether they exist or not.

The market share game goes something like this: In an economic downturn, the market leaders grab market share from weaker rivals. When business gets better, the leaders get stronger. Not surprisingly, everyone wants to look like a leader.

"Every company I cover will say it has gained market share on a competitor," said Legg Mason software analyst Paul Krieg. "People will play all kinds of games about how they are counting and what they are counting."

Let the games begin.

• Oracle is the king of market share talk. In recent quarters, Chief Executive Larry Ellison has talked down some competitors such as Siebel Systems, PeopleSoft and IBM. Not surprisingly, Oracle recently claimed it gained market share. But its rivals in the database market, Microsoft and IBM, may in fact be gaining share.

An Oracle spokeswoman said the company relies on third-party research for its market share claims.

• With Intel's third-quarter earnings and revenue down sharply from a year ago, the company said it is gaining share on Advanced Micro Devices. AMD, Intel's primary rival, said it has at least held or possibly gained market share. Analysts said in all likelihood the two companies are quibbling over gains of a fraction of a percentage point.

• Even the usually low-key IBM is getting in on the act. John Joyce, chief financial officer for IBM, said in the company's earnings conference call that it was gaining share against EMC in storage, Sun Microsystems in high-end servers, and BEA Systems in middleware.

"IBM's business model is picking up momentum," said Joyce, who urged analysts to look at industry reports from Giga Information Group, Gartner and IDC.

And there's the catch.

Market share claims by individual companies are guesstimates at best, and the research firms (Gartner, IDC and others) that tally the official data are months--if not quarters--behind what's actually happening.

A Gartner Dataquest spokeswoman acknowledged that many of the company's market share tallies are annual, but said there are occasionally quarterly updates depending on the sector. Market share data for hardware--workstations, PCs and handhelds--is issued quarterly, but areas such as storage and software get updated annually.

"Most firms take a long time to release stats, and many are still working off of 2000 stats, which are useless now," Krieg said.

Analysts also note that companies make market share claims by arranging numbers in all sorts of creative ways. Some companies go by units shipped, others by actual dollars, and no one seems to agree on what products actually go into a category.

An IBM spokeswoman said Big Blue made its market share claims based on industry reports and "our own assessments."

Simply put, market share is a flimsy topic.

IBM gets squishy
Is IBM really beating up on its rivals in select areas?

"It could be, but you need to look at the aggregate share data to put it in context," said J.P. Morgan analyst Daniel Kunstler. The analyst said that though IBM may be gaining share on both Sun and EMC, it might be attributed to the latter two companies' reliance on financial services, telecommunications and dot-com customers, which have cut back or gone extinct.

Indeed, EMC and BEA moved quickly Wednesday to add "context" to IBM's market share claims.

Citing Gartner Dataquest statistics, BEA issued a press release touting that it has the leading market share position for the application server software market. BEA had a 10 percentage-point lead over IBM, but it used Gartner market statistics for 2000.

EMC also wasn't thrilled with IBM's assertion.

"This is not a zero-sum game," Executive Chairman Mike Ruettgers said during the company's earnings conference call. "Not even combined revenues in storage from IBM and Hitachi, much less their incremental business, equal the drop-off in our business. Much of this decline in the storage business is due to the economy, and much has just disappeared."

EMC executives argued that IBM is winning deals by packaging storage with services and gaining market share at the expense of profits. Should that be a market share gain with an asterisk by it?

Given the market share bravado from the tech sector, analysts said it makes sense to be skeptical of all claims. "Even the official statistics have to pass the sniff test now," Krieg said.