PC Market Growth Dips To 9.7% As Demand In Europe Slows, According to IDC

FRAMINGHAM, MA – JULY 19, 2006 – The worldwide PC market continued to grow at a healthy pace in the second quarter of 2006, although slow growth in Europe limited worldwide shipments to an increase of 9.7% year on year, according to IDC's Worldwide Quarterly PC Tracker.

While overall growth remained strong, there were some unexpected twists in regional performance. Inventory from the first quarter and distractions from the World Cup significantly cut into European growth with shipments increasing by roughly 7% year on year compared to twice that the prior quarter and a forecast of 12%. Meanwhile, shipments in the United States increased by 6.7% on aggressive competition among the market leaders following slower growth the prior two quarters. Latin America and Asia/Pacific excluding Japan (APeJ) also saw strong growth in the quarter, while growth in Japan was slower than expected.

Acer continued to gain share worldwide while Fujitsu Siemens struggled in its core markets. Dell improved on its first quarter performance, growing U.S. shipments roughly in line with the market and gaining share worldwide. HP had another strong quarter in the United States, but the slow market in Europe constrained overall growth to 13% from more than 23% the prior quarter. Gateway and Apple also performed well with growth of roughly 16% in the U.S.

"We continue to see aggressive competition as the market transitions to a new phase," said Loren Loverde, director of IDC's Worldwide Quarterly PC Tracker. "In addition to changing regional dynamics, we can expect to see heightened competition in the second half of the year as companies vie for growth. Aggressive competition between processor vendors and the delayed release of Windows Vista will contribute to the changes vendors face entering the next cycle in the PC market."

"Manufacturers in the United States were very assertive in the second quarter and used low prices and portable adoption to collectively reverse sluggish growth trends from the previous six months," said Richard Shim, senior analyst with IDC's Personal Computing program. "HP, Apple, and Gateway led the charge with double digit growth rates outpacing the industry average. Dell slightly lagged the market while maintaining its leadership position by a wide margin."

Regional Outlook

— United States – Total shipments came in slightly ahead of forecasts. While portables growth remained strong, demand for desktops also made a significant contribution. Strong growth from HP and an improved performance from Dell also helped boost growth.

— EMEA – Slowing demand in Western Europe with the additional impact of the World Cup and increased inventory levels in Q1 contributed to constrain second quarter sales in EMEA. The shift to portables continued across the region, although growth of both desktops and portables declined notably from prior quarters.

— Japan – Despite optimism on the economic front, PC shipment growth continued to slow as commercial replacements decline and the consumer segment faces growing competition from other electronics such as flat-screen TVs.

— Asia/Pacific (excluding Japan) – Growth in APeJ continues at a rapid pace, fueled by China's robust GDP growth and technology adoption. Other large markets such as India and South Korea grew slightly slower than expected, although robust growth in China more than compensated, keeping regional growth above 18%.

Vendor Highlights

— Dell remained the clear market leader and gained worldwide market share despite facing tougher competition than in recent years. A strong performance in key international markets contributed as worldwide shipment growth was up incrementally from 10.2% in the first quarter to 10.9% year on year in the second quarter. Shipments to the United States, which represent more than half of Dell's business, show strong sales in portables and in public sector sales, but grew slightly below the overall market.

— HP had another robust quarter, boosted by strong growth in the United States. The company managed second quarter growth of more than 15% in the U.S. market. Growth in EMEA slowed with the market, but strong U.S. demand and other international markets kept overall growth in double digits.

— Lenovo managed a nice recovery in the United States with shipments rising almost 6% year on year. Worldwide growth of nearly 13% was also positive – coming in ahead of Dell and roughly even with HP. However, essentially all of the growth continues to come from APeJ, while shipments in other regions decline.

— Acer continued to make steady gains across major regions. Worldwide shipment growth declined a bit from prior quarters, but remains the fastest of the top vendors. Growth in the company's largest markets – EMEA and APeJ – was down from prior quarters, but continues at a multiple of the broader markets, and expansion in other regions continues at a rapid pace.

— Fujitsu/Fujitsu Siemens was hampered by the slowing European market. Worldwide shipments were flat from a year ago as continued slow growth in Japan was unable to compensate for a slight decline in Europe.

— Gateway had a strong quarter, with shipments growing by roughly 15% year on year. The United States dominated shipments and growth in the second quarter and overall growth slowed from a spike in the first quarter. However, this is the fifth consecutive quarter of double-digit gains for the company, representing a strong turnaround after refocusing its distribution channels.

— Apple shipments increased by double digits in the second quarter following a slow first quarter. Strong portable PC sales through its retail outlets had a significant impact with retail growing by 50% and portables by over 60% year on year. The strong growth reflects a successful transition to Intel-based systems – a critical transition for the company that sets the stage for future growth.

Top 5 Vendors, Worldwide PC Shipments, Second Quarter 2006


(Units Shipments are in thousands)

Rank Vendor Q2 2006 Shipments Market Share Q2 2005 Shipments Market Share 2Q06/2Q05 Growth

1. Dell 9,986 19.2% 9,002 19.0% 10.9%

2. HP 8,272 15.9% 7,320 15.4% 13.0%

3. Lenovo 4,010 7.7% 3,555 7.5% 12.8%

4. Acer 2,796 5.4% 2,061 4.3% 35.7%

5. Fujitsu/Fujitsu Siemens 1,775 3.4% 1,771 3.7% 0.2%

Others 25,245 48.5% 23,767 50.1% 6.2%

All Vendors 52,084 100.0% 47,477 100.0% 9.7%


— Shipments include shipments to distribution channels or end users. OEM sales are counted under the vendor/brand under which they are sold.

— PCs include Desktop, Notebook, Ultra Portable, and x86 Servers.

— PCs do not include handhelds. Data for all vendors are reported for calendar periods.

Source: IDC, July 19, 2006

Top 5 Vendors, U.S. PC Shipments, Second Quarter 2006 (Preliminary)

(Units Shipments are in thousands)

Rank Vendor Q2 2006 Shipments Market Share Q2 2005 Shipments Market Share 2Q06/2Q05 Growth

1. Dell 5,437 34.2% 5,111 34.3% 6.4%

2. HP 3,195 20.1% 2,765 18.6% 15.5%

3. Gateway 1,039 6.5% 890 6.0% 16.7%

4. Apple 760 4.8% 655 4.4% 16.0%

5. Lenovo 640 4.0% 608 4.1% 5.3%

Others 4,805 30.3% 4,855 32.6% -1.0%

All Vendors 15,876 100.0% 14,884 100.0% 6.7%