U.S. Economy Takes Toll on PC Market

The U.S. economic situation is having a growing impact on other regions, just ask PC vendors. Worldwide PC shipments in the second quarter of 2001 totaled 30.4 million units, a decline of 1.9 percent from the second quarter of 2000, according to preliminary data from Dataquest Inc. This is the first time the worldwide PC market has had a negative growth rate since 1986.

“Without a major shift in the PC industry structure, future sustained high-growth rates are improbable. To address these issues, the industry needs to create a more compelling value proposition for users that extends beyond the typical price/performance metrics that have dominated industry thinking,” said Todd Kort, principal analyst of Gartner Dataquest’s Computing Platform Worldwide group. “For the time being, vendors continue to opt for price cutting rather than changing PC design to stimulate growth.”

Dell was the only top-tier vendor to have positive growth rates both worldwide and in the United States. Dell increased shipments throughout the world, particularly in Japan, Asia-Pacific and Latin America, with 30 percent to 50 percent growth.

“Despite being overdue for an upgrade cycle in both the home and professional segments, Europe continues to underperform relative to expectations. Initial estimates show the Western European PC market will exhibit negative growth,” said Mikako Kitagawa, industry analyst of Gartner Dataquest’s Computing Platform Worldwide group. “Asia-Pacific is expected to experience single digit growth in the second quarter. Latin America is feeling the impact of economic events in the United States, and it is expected to slow to low-teen growth levels. In Japan, only mid single-digit growth is expected because of a weak home market.”

This is the second consecutive quarter of negative growth for the United States, which saw its PC market decline 6.1 percent in the second quarter of 2001. Price pressures intensified in the United States as some competitors followed Dell with substantial price reductions. Gateway declared it would beat the lowest price from competitors on comparable PC configurations, while H-P and Compaq lowered prices for their business desktop models.

“While inventory efficiency remains extremely important in managing gross margins, gross margin continues to erode, forcing vendors to put more focus into reducing operating expenses, if they are to meet profitability goals,” said Martin Reynolds, group vice president and research fellow for Gartner. “As a result, all of the major vendors have laid off workers and/or consolidated parts of their operations. This is an interesting dynamic for the industry and for customers to watch going forward, as it has the potential to negatively impact customer satisfaction both in terms of product quality and customer experience.”

PC Vendor Unit Shipment Estimates — Q2 2001
(Thousands of Units)
Company Q2 2001 Q2 2000 Growth
Shipments Market Share Shipments Market Share
Dell 4,000 13.1% 3,328 10.7% 20.2%
Compaq 3,397 11.2% 3,966 12.8% -14.4%
IBM 2,130 7.0% 2,288 7.4% -6.9%
H-P 2,065 6.8% 2,258 7.3% -8.5%
NEC 1,258 4.1% 1,374 4.4% -8.5%
Others 17,578 57.8% 17,818 57.4% -1.3%
Total Market 30,429 100.0% 31,033 100.0% -1.9%
Note: Data includes desk-based PCs, mobile PCs and PC servers
Source: Gartner Dataquest

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