In Tough Year, Dell Shines

PC manufacturing was a tough market in 2001 for most U.S. firms, but some have weathered the storm better than others and none have
done quite so well as Dell Computer Corp.

The Austin, Texas-based company Friday trumpeted that its fiscal fourth-quarter operating results were stronger than anticipated, and that overall
revenue and earnings for the period will exceed guidance. The company said it now expects quarterly sales of about $8 billion, up
from a projected $7.6 billion. It also said it anticipates earnings of 17 cents per share, as opposed to previous guidance of 16
cents per share.

Dell said its consumer business, which led the charge in the fourth quarter, is expected to produce a sequential increase in product
shipments of about 50 percent while increasing revenue growth from the third quarter by about 40 percent.

A little history
In the third quarter of 2000, IDC said Dell led the
pack in units shipped in the U.S., with 19.7 percent market share. It held second place — behind Compaq — in
worldwide PC shipments with 11.6 percent market share. In the fourth quarter of 2000, as the market began to tighten, Dell powered
through and grabbed 22.2 percent market share in U.S. shipments. As for worldwide shipments, Compaq declined in that quarter,
falling from 14 percent share to 12.9 percent share, but still held onto the number one slot. Dell managed to increase its worldwide
market share to 11.7 percent in the fourth quarter of 2000.

A year has passed since then, and Dell has continued to accelerate. At the end of fourth quarter 2001, IDC said Dell’s U.S. market
share had increased to 27.5 percent, while Compaq, Dell’s closest rival in the U.S. market, declined from fourth quarter 2000 market
share of 15.1 percent to 12.7 percent market share. In the worldwide market, Dell overtook Compaq. IDC said Dell captured 14.2
percent of the worldwide market in the fourth quarter of 2001, while Compaq, now second place, slipped to 11.2 percent.

In fact, IDC said Dell was the only one of the top five vendors to grow shipments in the U.S. and worldwide year on year.

The competition
Compaq’s worldwide shipments rose 16.3 percent sequentially, while fourth quarter year-on-year shipments fell by 19.1 percent. In
the U.S. its sequential growth only reached 2.5 percent while its year-on-year shipments fell by 24.7 percent. However, IDC said it
did manage to reduce inventory internally and in channel, and made strides in shifting to a direct distribution model.

Hewlett-Packard Co. , meanwhile, showed sequential growth of 35.5 percent, helping it to recover from a difficult
third quarter and remain number three in market share both in the U.S. and worldwide. Still, shipments were down 7.8 percent year on

Gateway Inc. shipments continued to decline in the fourth quarter and the company pulled out of many international
markets, IDC said. Competition from Dell and HP took its toll on shipments in the United States as well. The company, while still
fourth in market share in the U.S., slipped from 8.8 percent share in Q4 2000, to 6.3 percent share in Q4 2001.

Finally, IBM Corp.’s shipments fell 22.1 percent year-on-year, though IDC said it achieved 5 percent growth
sequentially. IBM has de-emphasized its client hardware business in favor of a more solutions oriented stance. During the year, it
folded its PC marketing and sales operations into the larger company and has since withdrawn from desktop manufacturing. The company
now plans on selling PCs primarily as part of an overall solution, IDC said. IBM was fifth in market share in the U.S. in the fourth
quarter, with 5.2 percent share. It took the number four slot in worldwide shipments, with 6.2 percent share.

A snapshot of the market
Meanwhile, the worldwide PC market shows some positive signs but remains under pressure, IDC said Friday.

“Hard times persist in the PC market, but vendors are working diligently to stimulate growth and the outlook has started to improve
in the United States and Europe,” said Loren Loverde, director of IDC’s Worldwide Quarterly PC Tracker. “We don’t expect a rapid
turnaround, but the seeds of recovery are being sown. Depending on the economic environment, growth in the PC market may pick up
more rapidly toward the end of the year.”

The firm noted that while the PC market remained depressed in the fourth quarter, holiday buying produced better-than-expected
results and shipments grew sequentially over the third quarter, even while they declined year on year. IDC said worldwide shipments
declined by 6.7 percent year on year in the fourth quarter but grew sequentially by 16.9 percent to 34.2 million.

IDC said the more important indicator of the market’s performance is the sequential growth, which it said lags only slightly behind
the average fourth-quarter sequential growth rate of 19.8 percent (from 1995 through 2000).

The strongest market over the year was Asia Pacific — excluding Japan — which IDC said was the only region to sustain shipment
growth from a year ago. The firm said PC sales continued to rise in the largest markets, but potential was limited in smaller
countries due to political and economic uncertainty. The Japanese market remains weak, and IDC projected double-digit declines in
the next few quarters there.

As was the case last year, the European market remained soft — especially in the corporate segment. IDC said small business and
consumer segments were the most active in Europe and continue to shift toward portable systems.

Finally, shipments in the U.S. fell 10.1 percent year on year, but beat expectations. IDC said sequential growth was 6.1 percent,
which it attributed in large part to increased home buying.

“U.S. consumers finally pulled out some of the stops in the fourth quarter,” said Roger Kay, director of Client Computing at IDC.
“After four quarters of subdued buying, consumers in the United States ended the year with a burst of activity, particularly in

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