PC Market Recovery Is Slow to Materialize, IDC Says

FRAMINGHAM, MA – JULY 18, 2002 – Despite hopes that worldwide PC shipments would increase for the first time in a year, total shipments were down 0.5% from a year ago to 31.1 million in the second quarter of 2002. Although shipment growth improved more significantly in the prior two quarters, the June quarter marks the fifth consecutive decline. The 0.5% decline compares with forecast growth of 1.3% while, sequentially, shipments were down 7.8% from the first quarter vs. a forecast decline of 6.2%.

 

"With steady improvement in prior quarters, the market was somewhat optimistic about the speed of a recovery," said Loren Loverde, director of IDC’s Worldwide Quarterly PC Tracker. "The fundamental drivers of a recovery are still in place – increasing economic stability if not improvement, an aging installed base, and continuing technology development – however, both consumers and businesses are still very cautious about investing. We still expect seasonal improvement in the second half, although the current results underscore the fragile state of the market."

"The consumer breeze that had picked up in the fourth quarter of 2001, and which held through early 2002, died shortly after the second quarter began," said Roger Kay, director of client computing at IDC. "In a becalmed consumer market, those vendors with exposure in retail were hurt, and inventories built in the channel. Direct vendors and those with some shelter from the fickle winds of consumer taste managed to gain share, as the commercial segment saw modest activity. White box vendors fared relatively better than the market, while second-tier players did worse."

As the education and holiday seasons get going in the back half of the year, the slightest puff from a recovering economy could propel the year to meet IDC’s forecast for mid-single-digit growth for 2002. Thus, IDC retains muted optimism for the third and particularly the fourth quarters, but says a fragile economy and uncertain political outlook remain wild cards.

Regional Outlook:

United States – Commercial market activity remained limited in the second quarter, essentially as expected. However, weakening consumer demand was a surprise that left several vendors with channel inventory to clear.

Europe – As in the United States, a broad return of commercial spending has yet to develop as businesses remain cautious about investments. Consumer demand was also slightly weaker than expected although consumer notebook shipments continue to grow.

Japan – Sell-through was inline with expectations although it appears inventory grew as sales into the channel outpaced expectations. Consumer demand was constrained by the distraction of World Cup Soccer and by price increases in response to rising component prices.

Asia – A hair behind forecasts, Asia Pacific excluding Japan continued to maintain growth in mid single digits. The government and education segments continue to drive growth while consumer spending was somewhat disrupted by World Cup Soccer.

Vendor Highlights:

HP – The new HP, including Compaq, has now assumed the number one spot in worldwide PC shipments. Facing a challenging merger in a difficult market, HP shipments for the quarter were down 16.2% year-on-year vs. a market decline of only 0.5%. This quarter may have been among the more difficult for the merger, but with market share declining steadily over the past year, HP will need to focus its PC business to stay ahead of Dell.

Dell – Still the number one PC vendor in the United States, Dell was the only one of the top 5 vendors worldwide to grow shipments from a year ago. Dell continued to outpace the market and maintain positive growth in each of the major regions although the U.S. market continued to be the real engine of Dell’s growth. U.S. shipments increased by more than 19% in the second quarter as the company took share from competitors – particularly in the consumer and education segments.

IBM – With IBM’s PC business refocused on the commercial market, the company was able to grow shipments in the United States despite the tough environment. Nevertheless, IBM lost ground internationally as businesses continue to defer spending.

Fujitsu – Still suffering from a weak commercial market, Fujitsu continued to lose ground in Europe. In Japan, the company recovered somewhat from a difficult first quarter.

Gateway – Gateway continues to suffer from a cautious consumer segment and fierce competition from rivals.

Apple – Despite a loss of momentum in flat panel iMac’s, total shipments increased slightly in a tough U.S. market. Still, with shipments declining in Japan and Western Europe, the company was more cautious about its prospects for the third quarter despite the traditional education spending

Top 5 Vendors, U.S. PC Shipments, Second Quarter 2002 (Preliminary)

(Units Shipments are in thousands)

Q2 2002 Q2 2002 Market Q2 2001 Market Growth

Rank Vendor Shipments Share Shipments Share 2002/2001

1 Dell 3,013 26.8% 2,525 22.8% 19.3%

2 HP 1,990 17.7% 2,293 20.7% -13.2%

3 IBM 660 5.9% 632 5.7% 4.4%

4 Gateway 651 5.8% 798 7.2% -18.4%

5 Apple 459 4.1% 453 4.1% 1.3%

Others 4,479 39.8% 4,351 39.4% 2.9%

All Vendors 11,252 100.0% 11,051 100.0% 1.8%

Notes:

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

Data for all vendors are reported for calendar periods.

Data for Hewlett-Packard includes shipments for Hewlett-Packard and Compaq.

Source: IDC, July 2002

Top 5 Vendors, Worldwide. PC Shipments, Second Quarter 2002 (Preliminary)

(Units Shipments are in thousands)

Q2 2002 Q2 2002 Market Q2 2001 Market Growth

Rank Vendor Shipments Share Shipments Share 2002/2001

1 HP 4,693 15.1% 5,600 17.9% -16.2%

2 Dell 4,600 14.8% 3,983 12.8% 15.5%

3 IBM 1,959 6.3% 2,148 6.9% -8.8%

4 Fujitsu Siemens 1,196 3.8% 1,311 4.2% -8.8%