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Dell beats Compaq in business sales

Dell became the largest vendor of PCs to U.S. businesses in the third quarter, passing its rival for the first time, according to analysts.

Dell Computer passed Compaq Computer in sales to large businesses for the first time last quarter, and the Round Rock, Texas company shows no sign of relenting.

Dell became the largest vendor of PCs to U.S. businesses in the third quarter with a 29.8 percent market share, according to Matt Sargent, computer analyst with ZD Market Intelligence, compared to a second place 23.6 percent share for rival Compaq. In the second quarter, Compaq was still in the lead with a 27.8 percent share compared to a 22.6 percent share for Dell.

Dell, in fact, is currently the only name vendor that appears to be growing significantly in this segment of the business, said Sargent. House-brand computers from resellers and integrators, known as "white box" computers, are growing slightly, but vendors such as Compaq, IBM, and Hewlett-Packard are declining or remaining relatively flat.

"This is a long-term thing played out," said Sargent. "They really started to come up strong in 1997. They are executing with large businesses." In the first quarter of 1996, the company had a 9.2 percent market share. A year later, that has risen to 11.1 percent. Five quarters later, Dell's market share doubled.

Sargent further added that the inventory bloat that occurred in the first half of the year does not affect the company's study. The study is based on interviews with customers and based on actual purchases by end-users in the quarter.

As evidence of the trend, Dell today announced that oil producer Mobil signed a three year deal, $75 million deal to standardize on PCs, notebooks, and NT servers. IBM has been supplying notebooks and NT servers to Mobil.

Despite the surge in sales, Dell has indicated that it will increase pricing pressure on other vendors in 1999. Dell CFO Tom Meredith recently told Wall Street analysts that the company will try to maintain its current 50 percent plus growth rates in the coming year, and will squeeze gross margins to accomplish that goal.

As a result, Dell will "increasingly become more price aggressive to maintain top line growth," said Kurt King, computing analyst with NationsBanc Montgomery Securities.