IDC Says PC Market Still Under Pressure Despite Positive Signs

FRAMINGHAM, MA – JANUARY 17, 2002 – The worldwide PC market remained depressed in the fourth quarter of 2001, although holiday buying produced better-than-expected results. Worldwide PC shipments declined by 6.7% year on year in the fourth quarter, but grew sequentially by 16.9% to 34.2 million. The results were an improvement from the third quarter, when shipments fell 13.4% year on year. However, the fourth quarter comparison was much easier since the market slowdown began in Q4 2000. The healthy sequential growth provides a better indicator of the market’s performance, as it is only slightly behind the average fourth-quarter sequential growth rate (from 1995 through 2000) of 19.8%.

 

"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."

Despite some improvements in the market, Asia Pacific excluding Japan was the only region to sustain shipment growth from a year ago. PC sales in the largest markets in the region continued to rise, although political and economic uncertainty in smaller countries limited their potential. Slower growth in mature countries as well as the depressed export market are also affecting regional shipments. The Japanese market continued to suffer from a deteriorating economy, with double-digit declines projected for the next few quarters.

The market in Europe remained soft, with continued weakness in the corporate segment. Small business and consumer were the most active segments in Europe and continued to shift toward portable systems.

Shipments in the United States continued to decline year on year, falling 10.1%, but beat expectations. However, sequential growth reached 6.1%, largely fueled by 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 retail." This surge turned a situation of oversupply around. Vendors, chastened from previous inventory excesses, had throttled back orders and suddenly found themselves scrambling for supply. Spot prices in key components rose, squeezing opportunistic buyers, such as the white box community.

The success of our response to the events of September 11th appears to have bolstered consumer confidence. However, U.S. businesses remained largely on the sidelines, eking more life out of their existing systems while waiting for better times economically.

Vendors

Dell continued to gain share, expanding its segment coverage and leveraging its direct business model to keep the pressure on its competitors. Dell was the only one of the top five vendors to grow shipments in the United States and worldwide year on year.

Compaq had stronger results internationally than in the United States. Worldwide shipments increased 16.3% sequentially in the fourth quarter while year-on-year shipments fell by 19.1%. In the United States sequential growth was limited to 2.5%, but year on year shipment were off by 24.7%. Nevertheless, Compaq made progress in reducing inventory both internally and in the channel. The company also continued to shift its distribution to a direct model and increase business efficiencies, which should help results as the market recovers.

IBM’s shipments declined 22.1% year on year, but grew 5.0% sequentially. As it moved toward a greater solutions orientation, the company further de-emphasized its client hardware business. IBM folded the PC marketing and sales operations into the larger company, and, as the new year began, withdrew from desktop manufacturing. From now on, the company expects to sell PCs primarily as a part of an overall solution.

With sequential growth of 35.5%, Hewlett-Packard recovered from a fairly tough third quarter, although shipments were down 7.8% from a year ago. Highlights of the quarter include relative strength with U.S. consumers in retail and solid growth in Europe.

Gateway shipments continued to decline, as the company pulled out of many international markets. Shipments in the United States also remained weak as a result of strong competition in the consumer segment, especially from Dell and HP.

Table 1

Top 5 Vendors, U.S. PC Shipments, Fourth Quarter 2001 (Preliminary)

(Thousands of Units)

Q4 2001 Q4 2001 Market Q4 2000 Market Growth

Rank Vendor Shipments Share Shipments Share 2001/2000

1 Dell 3,037 27.5% 2,727 22.2% 11.4%

2 Compaq 1,402 12.7% 1,862 15.1% -24.7%

3 Hewlett-Packard 1,346 12.2% 1,554 12.6% -13.4%

4 Gateway 693 6.3% 1,077 8.8% -35.6%

5 IBM 575 5.2% 744 6.0% -22.7%

Others 3,999 36.2% 4,332 35.2% -7.7%

All Vendors 11,052 100.0% 12,297 100.0% -10.1%

Notes:

Vendor shipments are branded shipments and exclude OEM sales for all vendors and represents shipments to distribution channels or direct to end-users.

Data for all vendors are reported for calendar periods.

Gateway number is IDC estimate prior to company release of quarterly results.

Source: IDC, January 2002

Table 2

Top 5 Vendors, Worldwide PC Shipments, Fourth Quarter 2001 (Preliminary)

(Thousands of Units)

Q4 2001 Q4 2001 Market Q4 2000 Market Growth

Rank Vendor Shipments Share Shipments Share 2001/2000

1 Dell 4,863 14.2% 4,286 11.7% 13.5%

2 Compaq 3,827 11.2% 4,729 12.9% -19.1%

3 Hewlett-Packard 2,722 8.0% 2,953 8.0% -7.8%

4 IBM 2,110 6.2% 2,709 7.4% -22.1%