PC Market Brightens in Second Quarter

Worldwide PC shipments surged ahead of expectations in the second quarter,
marking the fourth consecutive quarter of positive growth and supporting
cautious analyst speculation that the market has finally turned around.

“The market is definitely moving in the right direction,” said Loren
Loverde, director of IDC’s Worldwide Quarterly PC Tracker, which released
its survey of second quarter shipments Wednesday. “It seems we dodged a
bullet with SARS, and the market remains cautious, but growth in the U.S.
and Europe is ahead of schedule and we’re still expecting increased
business spending and continued portable adoption. There’s a chance the
results are driven by aggressive short term pricing, so I wouldn’t throw
caution to the wind, but these are very good results.”

Those sentiments were shared by Charles Smulders, vice president of
Gartner’s computing platforms worldwide group, which released the results
of its own survey on Wednesday.

“The PC industry performed better than expected, and suggests that market
conditions are improving,” Smulders said. “However, sustained improvement
will depend on economic conditions and their effect on the business upgrade
cycle. Recent Gartner IT Watch survey data confirms U.S. corporate budgets
remain tight.”

Gartner’s preliminary results varied slightly from IDC’s, finding that
worldwide PC shipments reached 32.8 million units in the second quarter of
2003, a 10 percent increase over the 29.8 million units shipped that it
recorded for the year-ago quarter. IDC, meanwhile, said worldwide PC
shipments hit 33.2 million units, but said that was only a 7.6 percent
increase over the 30.8 million units its numbers show were shipped in the
year-ago quarter.

Either way, both firms agreed that the quarter represents the highest
growth rate since the end of 2000.

Both research firms show that Dell led the pack in
shipments. Gartner said Dell shipped 5.7 million PCs (including desktops,
mobile PCs and IA32 servers) in the second quarter, giving it 29.5 percent
growth and 17.6 percent share of the market. IDC found that Dell shipped
5.9 million units (including desktops, notebooks, ultra portables and
standard Intel Architecture servers priced at less than $25,000), giving it
29 percent growth and a 17.8 percent share in the market.

“Dell had a very strong quarter, boosting year-on-year growth to nearly 29
percent worldwide and sustaining a growth premium versus the market of over
20 percent in the second quarter,” IDC said. “Dell’s performance was
supported by strong international sales, and growth across form factors.
The company’s strategy of targeting key segments in specific geographies
has proven successful and well executed.”

The figures also show that Hewlett-Packard is making a
strong play for the first place slot. Gartner found that HP (whose results
merged HP and Compaq numbers for the first time) shipped 5.2 million units
in the second quarter, giving it 12.1 percent growth and 16.1 percent
share. IDC said HP shipped 5.3 million units, giving it 13.3 percent growth
and 16.2 percent share.

“HP also had a strong quarter, growing faster than the market both in the
U.S. and worldwide,” IDC said. “The gains reflect growing consumer sales in
response to aggressive pricing as well as some activity in the commercial
segment. Consumer spending also contributed to strong results in EMEA.”

HP was quick to point out that it is a close race between Dell and itself.

“The PC growth is good news for the industry,” said Jim McDonnell, vice
president of marketing for the HP Personal Systems Group. “Once again this
quarter, the race continues to be a two-horse competition between HP and
Dell — and notably the gap between the rest of the pack and industry
leaders HP and Dell continues to grow.”

He added, “The two companies are virtually neck and neck again, separated
by just over 500,000 of the industry’s more than 33 million units shipped
worldwide during the quarter. That’s less than two days worth of shipments
over a 90-day period — in a real horse race, you would need a photo finish
to judge the outcome.”

IBM rounded out the top tier of sellers. Gartner said IBM
shipped 2.1 million units worldwide, showing 13.4 percent growth and
capturing 6.7 percent of the market. IDC also showed IBM shipping 2.1
million units, but said that represented 11.9 percent growth and a 6.6
percent cut of the market.

Gartner’s analysts pointed out that IBM’s shipment increase, in particular,
is a good indication that the business segment of the market may be
improving. IDC highlighted that IBM saw solid sales in its recently
launched ThinkCenter line, as well as its portable PCs and wireless-enabled

Both research firms slugged Fujitsu Siemens as the fourth place vendor.
Gartner reported 1.3 million shipments, marking 10.8 percent growth and 4
percent market share, while IDC gave the firm 1.2 million shipments,
signifying 7.1 percent growth and 3.8 percent market share.

“Fujitsu Siemens had a solid quarter, beating market growth in its key
markets of Japan by nearly 9 percent and holding ground in Western Europe
with solid portables shipments,” IDC said.

The firms varied in their opinions on the fifth-place finisher. Gartner
gave it to NEC, saying the firm recorded 1 million shipments, denoting a
decline of 2.7 percent and a shrinkage of its share to 3.1 percent.
However, IDC, put Toshiba in the fifth-place slot, saying it had 1 million
shipments on 10.8 percent growth, giving it 3.1 percent share of the

Meanwhile, Gateway failed to make either top-five list.

“Although shipment and growth data are still being finalized, Gateway
continues to face growing competition in key consumer and small business
segments,” IDC said. “The company’s efforts to diversify its product
offering may help profitability, but the broader consumer electronics
market is already competitive, and the diversification is unlikely to boost
PC volumes significantly.”

Overall, Gartner and IDC both saw promising growth in the U.S. market.

Gartner said U.S. shipments surged 11.1 percent, boosted by the consumer
and education segments.

“In the home market, competitive pricing and mobile PCs were important
drivers,” Smulders said. “Mobile PCs continued to be the hot item in the
retail space.”

IDC, meanwhile, said U.S. shipments grew by 8.1 percent, still ahead of
forecasts, largely due to aggressive pricing. It noted that Dell share in
the U.S. market grew from 25.6 percent in the year-ago quarter to 31.5
percent in the second quarter of 2003 on shipments of 3.7 million. HP grew
from 15.2 percent share to 19.1 percent share, on shipments of 2.2 million.

“The consumer segment seems to have led growth, but the public sector was
more resilient than expected, and commercial demand is showing signs of
improvement,” IDC said.

The firms agreed that all global regions showed positive growth compared to
a year ago, with EMEA and Latin America both exceeding growth expectations.
Gartner said Asia/Pacific came in below expectations, based primarily on
the effects of SARS on business activity in China. However, IDC said
Asia/Pacific beat forecasts, with major markets recovering from SARS more
quickly than expected.

“Growth slipped only minimally from the first quarter and is expected to
improve the rest of the year as the market moves beyond SARS and looks for
growing export business.”

However, IDC broke out Japan, noting that shipment growth there improved
somewhat after a disappointing first quarter.

“Nevertheless, some of the improvement was due to an easy year-on-year
comparison as the soccer World Cup distracted consumers from purchases
while the market was suffering from export weaknesses in 2001 and 2002,”
IDC said. “The latest results reflect a slight improvement, but the market
remains constrained.”

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