Q2 U.S. and Worldwide PC Markets Mediocre, According To IDC

FRAMINGHAM, Mass., July 27, 1998 — Channel inventory corrections and continued economic woes in Asia produced mediocre U.S. and worldwide PC market growth during the second quarter, according to preliminary market and vendor shipment data released today by International Data Corporation (IDC). Total U.S. PC

vendor shipments* grew 10 percent over last year and declined one percent sequentially. Worldwide, PC shipments rose seven percent over 2Q97 and declined three percent sequentially, as Western Europe continued its rebound and the Asia/Pacific and Japan markets experienced negative year-over-year growth.

"Inventory clearing and a focus on leaner inventory positions during the second quarter held unit shipments in check among indirect vendors," said Christine Arrington, a U.S. PC analyst with IDC. "As a result, there were some shifts in U.S. market share; most notably Dell and Compaq were neck and neck for the top

spot."

Second quarter growth was also hurt by a soft portables market in Japan and the United States. On the positive side, unit shipments in Western Europe grew 20 percent, partially driven by strong consumer demands in France, Germany, and the UK. Windows 98 also helped drive sales at the quarter's end, following a weak

retail market in May.

Vendor Results

The quarter was noted by some changes in unit shipment share positions. While Compaq significantly slowed its unit shipments into the channel, Dell was able to continue its established fast growth pattern and create a virtual tie for the number one position in the United States. The next tier of vendors within the U.S. are equally close, with HP, Gateway, and PB NEC at almost identical market shares.

The second quarter represents a crossroads for many of these vendors, but individual growth rates provide a clearer picture of each vendor's direction. As Compaq and HP stabilize their inventory situations and shift back into growth mode, and direct vendors build on their established market momentum, U.S. vendor share positions should be clearer in the quarters ahead.

Compaq's channel clearing efforts, which were focused in the U.S., held year-over-year growth at 11 percent and led to a sequential decline of 21 percent. (Note Compaq's results include Digital PC shipments.) Compaq also

clearly maintained its number one position in worldwide unit market share.

Dell maintained its heady pace and near-flawless execution as it shipped 72 percent more units in the U.S. than the year-ago period, and 21 percent more than during the previous quarter. This continued rapid growth has put Dell in contention for the top spot in the U.S., setting the stage for an intense battle with Compaq in coming quarters.

Hewlett-Packard's U.S. unit shipments were up on healthy growth of 33 percent, with a sequential growth of 3 percent. Despite strong commercial desktop sales, product delays in consumer desktops and portables hampered growth.

Gateway boosted U.S. unit shipments by 33 percent over the previous year, enabling the company to remain firmly in the top five, despite what is seasonally its slowest quarter. The direct model, combined with robust

government and educational sales, helped the company overcome a slow start in consumer demand during the quarter.

Packard Bell NEC continues to struggle, with U.S. unit shipments declining 10 percent from last year. The company has not been able to reverse its slide in retail, with relentless pressure from other retail vendors in lower price points. The company has also grappled with its commercial business model, which has failed to spark growth.

Table 1

Top 5 Vendors, U.S. PC Shipments, Second Quarter 1998 (Preliminary)

(Thousands of Units)

Note: Please contact one of the analysts for further details.

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

**Compaq sales include all Digital Equipment Corp. PC sales for the quarter Source: International Data Corp., Q3 1998

About IDC

Headquartered in Framingham, Mass., International Data Corporation provides IT market research and consulting to more than 3,900 high-technology customers around the world. With a global network of 375 analysts in more than 40 countries, IDC is the industry's most comprehensive resource on worldwide IT markets, products, vendors, and geographies.

IDC/LINK, an IDC subsidiary, researches and analyzes the home computing market, leading-edge technologies in telecommunications and new media, and the convergence of computing and consumer electronics.

IDC's World Wide Web site (http://www.idc.com) contains additional company information and recent news releases, and it offers full-text searching of recent research.

IDC is a division of International Data Group, the world's leading IT media, research, and exposition company.

All product and company names may be trademarks or registered trademarks of their respective holders.

For more information, contact:

Christine Arrington/John Brown/Kevin Hause

650-691-0500

carrington@idc.com

Bruce Stephen/Roger Kay

508-872-8200

bstephen@idc.com