Dell and HP slug it out for top spot in PCs

Dell Computer wrestled the top rank in worldwide PC shipments away from Hewlett-Packard in the first quarter of 2003 in a market that managed to grow a little bit.

Dell shipped about 450,000 more desktops, notebooks and Intel-based servers worldwide than rival HP, according to research firm Gartner, giving Dell the top spot once again. The two companies have now traded the coveted designation four quarters in a row.

Round Rock, Texas-based Dell accounted for 16.9 per cent of the market worldwide, according to research firm Gartner, growing by 24.4 per cent over the same quarter a year ago. HP, meanwhile, accounted for 15.6 per cent of the market, a 5.7 per cent decline from the combined shipments of HP and Compaq Computer a year ago.

Overall, PC shipments were slightly ahead of modest predictions. According to Gartner, 34.5 million PCs left factories in the first quarter, an increase of 5.5 per cent. Shipments in the US increased 7.7 per cent, the firm said.

Rival researcher IDC said worldwide shipments rose 2.1 per cent year over year, slightly better than expectations of 2 per cent growth. In the US, unit shipments grew by 1.5 per cent year over year versus an expected decline of about half a percent, IDC said. Despite the discrepancy in the percentages, both firms drew the same conclusions about the quarter. One of the biggest surprises was the emergence of Toshiba as one of the 'top five' PC makers, a sign of the growing importance of notebooks. Toshiba was the only other major manufacturer beside Dell to experience double-digit growth. Most others shrank.

Dell's recapturing of the top spot was "not a big surprise, because we knew [that the two companies] were in stiff competition but Dell executed well and took a lead of about a point-and-a-half of market share", said Loren Loverde, director of IDC's Quarterly PC Tracker service.

"HP also suffered some supply-chain problems in Europe. HP's performance there was impacted by a number of supply-chain issues, which disrupted logistics and the delivery of key volume products," Gartner analyst Charles Smulders said.

IDC and Gartner, which both released first-quarter results for the PC competitors last Thursday afternoon, said that the Dell-HP battle will continue on for several quarters to come.

"Dell has been very consistent in maintaining unit shipment growth of over 20 per cent. HP is settling a little still after the merger [with Compaq]. Its shipments were down about 6 per cent year over year," Loverde said. "Dell has got very solid momentum, so HP is going to have to work to get the top spot back."

An HP executive characterised the battle with Dell as an up-and-down one, noting that HP benefits during the holidays, when consumer sales are strongest.

"It's a two horse race," said Jim McDonnell, vice president of marketing for HP's PC unit. "It's close and it's going to continue to be close."

McDonnell declined to predict whether HP would reclaim the number one spot in the second quarter but said that the company should show improved year-over-year results now that it is nearly one year since the Compaq acquisition was completed.

With shipments coming in just a hair ahead of its predictions on a year-over-year basis, the market appears to be returning to its normal seasonal patterns. In a normal year, PC shipments decline from the fourth to the first quarter but begin to accelerate again in the third quarter. Still, demand is far from robust.

"We saw a better performance principally in the Americas; both Latin America and the US [profits] were slightly higher than our expectations. The U.S. saw a stronger consumer market (than expected) and continued strengthening of notebook sales," Smulders said. Some of the increased demand, however, came from price cuts.

"We've felt, for a number of quarters, that we were going to see normal seasonality," Loverde said. "What's more significant is the base level of growth. We're tracking very close to forecast. Unfortunately that forecast is for slow growth."

Indeed, IDC has predicted that worldwide PC unit shipments will increase by only about 6.9 per cent during 2003. It's a modest increase at best, though it outpaces 2002's growth rate of 1.5 per cent and the decline in 2001, according to IDC.

Rounding out the top five in the world were, in order of success, IBM, Toshiba and NEC, according to Gartner. In the US they came in as IBM, Gateway and Toshiba.