PC market declines in 2001; slow turnaround expected

Everybody knew 2001 was a hard year for the PC market, but official numbers now show the year was a bloodbath.

Worldwide shipments declined by 4.6 percent over the prior year. It was worse in the U.S., where the drop was 11.1 percent, according to Dataquest Inc. in San Jose. (Dataquest includes desktops, laptops and PC servers in its definition of PCs.) Last year's decline is only the second in the history of the PC market. The other came in 1985, when worldwide shipments fell by 2.3 percent and plunged by nearly 22 percent in the U.S., according to Dataquest.

The drop in sales was due to poor economic conditions, a saturated market and the fact that consumers and users in large companies postponed PC upgrades, figuring there wasn't a big enough performance improvement in new models, said Charles Smulders, a Dataquest analyst.

Also, an expected return to desktop buying by Fortune 500 companies didn't happen in the fourth quarter, although consumer sales improved, Smulders said.

Smulders said yesterday, when the numbers were released, that "there is now a mood of optimism in the industry, having made it through the bloodbath that was 2001." But he also warned that "evidence for an immediate improvement in the first quarter of 2002 is far from clear."

Still, he said the market doesn't appear to be getting any worse as of mid-January. Gartner Inc., the Stamford, Conn.-based parent of Dataquest, doesn't expect a significant upturn in PC shipments until the fourth quarter, assuming that the economy improves in the second half of the year, Smulders said.

Dell Computer Corp. in Round Rock, Texas, was the striking exception in last year's downturn, posting an 18.3 percent surge in shipments that made it the world leader, with nearly 17 million PCs shipped. All other leading vendors saw double-digit declines.

Dell's performance meant it displaced Compaq Computer Corp. for the top spot. Compaq's sales declined 17 percent from the prior year, to more than 14 million units worldwide for 11.1 percent of the market.

Last year was marked by price slashing, led by Dell in the first quarter, noted Martin Reynolds, also a Dataquest analyst. Some packages of fully loaded desktops with flat-panel monitors went for less than US$900. Dell's lead meant competitors "faced the choice of following its lead or face major share losses," he said.

Reynolds also said Compaq's decline might be due to negative reaction to the Compaq and Hewlett-Packard Co. merger. He, other analysts and users have said the merger would create uncertainty on the part of buyers about which of the two brands would dominate and make for a good investment.

In the U.S., Dell was so far ahead of the pack that even the combined sales of Compaq and HP could match it. Dell's U.S. shipments rose 14 percent, to 10.7 million units, for nearly 25 percent of the market. By comparison, No. 2 Compaq shipped 5.5 million units in the U.S. (down 28 percent), and HP shipped 4.4 million (down 22 percent).

Gateway Inc. finished fourth in the U.S., pushing IBM Corp. to fifth. The top five vendors comprise 60 percent of the market.

Worldwide, the top three spots went to Dell, Compaq and HP, followed by IBM and Japan's NEC Corp. Those top five comprise 42 percent of the market.

In the U.S., nearly 44 million PCs were shipped last year, down from more than 49 million in 2000. Worldwide, shipments totaled 128 million, down from 134 million in 2000.

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