Last year's market share figures, to be issued today by International Data Corp. (IDC) and Dataquest, tell a surprising tale that few anticipated. Despite early predictions that the PC was dying, price wars in the United States and recovering economies in Asia fueled higher-than-expected growth--and the Y2K scare played a comparatively small role.
According to the studies, IBM and Compaq saw their global and U.S. market shares shrink, to the benefit of Dell, Hewlett-Packard, Apple Computer and Gateway.
But in many ways the year belonged to Dell. The Round Rock, Texas-based company leaped past Compaq in the United States with a 16.6 percent market share for its first-ever year as No. 1. In addition, the company achieved a global market share of 10.5 percent to pass IBM as the second-largest PC company in the world, according to IDC. Overall, nearly 12 million boxes emerged from Dell's factories.
Dell first overtook Compaq in the third quarter in U.S. shipments, but it had been an open question whether it could keep the lead in the fourth quarter because memory and LCD screen shortages appeared to hurt Dell harder than others.
Dell also grew faster than its competitors according to both studies. The company's PC shipments grew 53 percent globally and 56 percent in the United States, according to IDC's figures.
Overall, PC shipments in the United States grew by 17 percent for the year, according to IDC, and 36 percent in a recovering Japan. In all, 112.7 million desktops, laptops and servers left factories in 1999, with 33.2 million of those going out in the fourth quarter.
"1999 was a great year. It was a little better than expected because we didn't expect the nearly free PC to do as well as it did," said John Brown, director of research at IDC. "After the fourth quarter (of 1998), no one was expecting (what happened in) the first or second quarter."
Charles Smulders, principal analyst for Dataquest's Personal Computers Worldwide program, said, "There had been concerns that Y2K shutdowns in large business, government and education segments would slow growth in the market in the second half of 1999, but the numbers indicate it had only limited impact on overall growth in the PC industry."
On the other hand, declining prices often contributed to thinner profit margins. Average selling prices climbed a bit in the second half of the year due to component shortages, but the rise of simplified computing devices and Internet access devices seems likely to continue putting pressure on PC makers.
For 1999, Dataquest said worldwide shipments grew 21.7 percent, nearly matched by the 21.6 percent climb in the United States. Unlike IDC, the company counts only desktops and notebooks, not servers, into the total.
The reports also show a shifting competitive landscape among the leading PC makers. Dell's main competitor among the big five in terms of growth was not Gateway, the other major direct PC seller, but HP.
The latter, which expanded its retail presence with aggressive pricing, saw its PC shipments grow by 40 percent in the United States and 32 percent worldwide, by IDC's figures. For the fourth quarter, HP grew by 64 percent in the United States. The company leapfrogged from fifth to fourth place in both markets.
"HP had a great consumer quarter. They were the ones that showed demand was still there," said Brown.
Apple also did well. The company was ranked seventh worldwide for the year, according to Dataquest, inching up in market share to 3.4 percent. In the United States, Apple came in sixth for the year; despite 17 percent growth, its domestic market share slipped slightly from 4.6 percent to 4.4 percent.
Apple followed Gateway in both year-end calculations from Dataquest, but IDC's Brown pointed out that Apple edged out Gateway in fourth-quarter comparisons.
"Worldwide they passed Gateway by a tad," Brown said. "They do have an opportunity to move up in the (rankings) for the first time in a long time."
The two companies that struggled the most, meanwhile, were two of the original PC makers. Both IBM and Compaq grew more slowly than the market as a whole in both the United States and the world, with Big Blue seeing its PC shipments shrink by 29 percent in the fourth quarter in the United States.
For the entire year around the world, Compaq led with a 14 percent market share, down from a global market share of 14.5 percent, according to IDC. Dell's worldwide market share rose to 10.5 percent from 8.5 percent. Despite shipping 17 percent more computers in 1999 than 1998, IBM saw its market share decline to 8.2 percent from 8.7 percent.
HP increased its shipments by 32 percent, which led to a market share increase to 6.7 percent from 6.3 percent. NEC experienced almost no growth in 1999, causing its market share to shrink from 6.5 percent to 5.5 percent.
In the United States for 1999, Dell went from a 13.2 percent market share to a 16.6 percent market share, while Compaq shrank from 16.7 to 16 percent. Gateway grew 32 percent, from 8.4 percent of the market to 8.9 percent, similar to HP's rise form 7.8 percent to 8.8 percent of the market.
In the fourth quarter alone, Compaq's worldwide share dropped from 15.1 percent in the previous year to 13.7 percent, while Dell grew from 8.3 percent to 10.1 percent. IBM saw a 6 percent contraction as its international market share went from 8.3 percent to 7.6 percent. HP grew by 49 percent to see market share go from 6 percent to 7.5 percent. Fujitsu-Siemens came in fifth with a combined market share of 5.2 percent.
In the United States, Dell shipped approximately 800,000 more computers than the same time last year, causing market share grow to 16.8 percent from 12.8 percent. Compaq grew by 4 percent, but its market share declined from 18.1 percent to 16.1 percent. HP grew by nearly three points to go from 7.3 percent to 10.2 percent while Gateway grew slightly to rise from 9.1 percent to 9.2 percent.
IBM, which announced plans to pull out of retail, saw PC shipments shrink by 284,000 and market share drop to 5.5 percent.