U.S. PC Market Feels Slowdown in Q1 2001

Preliminary numbers from Gartner Dataquest found more than just negative growth in the U.S. personal computer market for the first quarter of 2001, they found the slowest quarter since Dataquest began tracking the PC market.

According to Dataquest, a maturing PC market and a downturn in the economy, are responsible for the U.S. PC market posting a growth rate of -3.5 percent. The weaker-than-expected growth in the U.S. market affected the worldwide PC market, which had shipments of 32.5 million units in the first quarter of 2001, an increase of 3.5 percent over the same period last year.

“The effects of the U.S. economic slowdown are beginning to spill over into other regions as shown their slowing growth, with the 3.5 percent world growth being the slowest since we began compiling statistics,” said Todd Kort, principal analyst of Gartner Dataquest’s Computing Platform Worldwide group.

Dell captured the No. 1 worldwide ranking with market share of 12.8 percent. The current PC component surplus helped Dell jump into the top spot, according to Dataquest analysts, because the company can pass on component price declines to its customers faster than its competitors because of its more efficient supply chain. Dell increased its lead in the United States, garnering 23 percent of the market. Compaq slipped into the No. 2 spot with 12.1 percent of the market after posting flat growth. Dell and IBM were the only top-tier vendors to have positive growth in both the worldwide and U.S. markets. Compaq and Hewlett-Packard lost market share as both were affected by inventory overhang issues. Gateway also lost market share and will pursue a more aggressive pricing strategy as it refocuses on selling hardware profitably, rather than services along with hardware.

While economic factors were a major influence on the U.S. PC market, inventory overhang from the fourth quarter of 2000 was also an issue. Shipments during the first quarter of 2001 were suppressed as vendors worked to sell off existing inventory before shipping new products.

“Even if component inventories were in balance with demand, saturation in the U.S. and parts of Europe is an issue that is clearly not going to go away, and vendors and the industry must look for ways to maintain revenue opportunities,” said Charles Smulders, principal analyst of Gartner Dataquest’s Computing Platform Worldwide group. “Most PC vendors recognize saturation but prefer not to greatly alter well-tested product and marketing formulas. International expansion is considered by most to be a strong enough remedy.”

Recent surveys conducted by Harte-Hanks, Inc. regarding purchases of PCs and servers found the technology industry is feeling the adverse impact of the current general economic uncertainty, but there are three segments where purchasing behavior remains strong: large-sized firms, universities and hospitals.

From June 2000 and February 2001, Harte-Hanks surveyed more than 115,000 U.S. and Canadian business sites. While almost every segment of the market has cut back its purchases and purchase intentions for PCs and servers between July 2000 and February 2001, one significant type of enterprise — large sites (more than 1,000 employees) — has reported a strong increase in plans to acquire both PCs and servers during the next 12 months. Plans to buy PCs in these firms are up 29 percent since the end of the fourth quarter, while server-buying plans have risen more than 50 percent during the same period.

Universities and hospitals are also reporting increases in their server-buying intentions, each totaling more than 10 percent. No North American industry segment surveyed reported increases in PC-buying intentions during January and February, Harte-Hanks found.

Purchasing intentions fell off sharply during the first two months of 2001 after a December increase typical of previous years. Sites with PC purchase intentions fell 39 percent between December 2000 and February 2001, and 30 percent from what was reported in July 2000, at the beginning of the third quarter. Similarly, sites with plans to acquire at least one server fell 42 percent between December and February, and 23 percent from what was reported in October 2000.

The number of sites with 500 or more employees reporting at least one PC purchase (in the 90 days preceding the interview) fell during third quarter 2000, but purchases bounced back at the fourth quarter 2000. However, the increase did not carry through to the end of the fourth quarter, as PC purchases dropped significantly, falling 24 percent between November and December. In February 2001, 25 percent of all mid- and large-size sites surveyed indicated a PC purchase in the previous 90 days — a 48 percent drop since the beginning of fourth quarter 2000.

Harte-Hanks’ data is based on 65,000 interviews conducted each month.


Preliminary U.S. PC Vendor Unit Shipments
Thousands of Units
Company Q1 2001 Q1 2000 Growth
(%)
Shipments Market
Share

(%)
Shipments Market
Share

(%)
Dell 2,525 23.0 1,932 17.0 30.7
Compaq 1,530 13.9 1,863 16.4 -17.9
Hewlett-Packard 1,075 9.8 1,427 12.6 -24.7
Gateway 935 8.5 1,029 9.1 -9.1
IBM 570 5.2 479 4.2 19.1
Others 4,334 39.5 4,639 40.8 -6.6
Total Market 10,969 100.0 11,369 100.0 -3.5
Note: Data includes desk-based PCs, mobile PCs and PC servers.
Source: Dataquest

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