Dell Becomes Top PC Supplier in the US

Dell Computer is now the number one PC vendor in the US. Dell barely edged out the previous leader, Compaq, in the second fiscal quarter of 1999. According to International Data Corporation (IDC), which released its latest findings on October 25, preliminary numbers for the third quarter indicate that Dell has widened its lead. Compaq, however, still leads worldwide sales. For the second quarter, Dell had 16.6 percent of the US market, while Compaq had 16.5 percent. For the third quarter, IDC’s preliminary estimates indicate that Dell has captured 18.1 percent of the market share, while Compaq has drifted down to 15.9 percent. Following the pack leaders, Gateway holds 9.2 percent of the US PC market share, HP has 8.4 percent, and IBM has 7.8 percent. In the worldwide market, Compaq is still holding strong. For the third quarter, Compaq has 13.8 percent of the world market share, while second place Dell has 11.6 percent. Compaq’s lead, however, has shrunk from the second quarter, where it held 14.4 percent of the market share compared to Dell’s 10.9 percent. These little percentage points represent tremendous fluctuations in revenue; IDC estimates worldwide shipments to be at 27.9 million units for the third quarter. The last quarter has been a period of tremendous growth for PC sales. According to IDC, “Steady global consumer demand and the sustained rebound of the Asia/Pacific PC market drove Q3 1999 year-over-year worldwide unit growth of 25%.” At the same time, Compaq’s commercial PC group reported an operating loss of $169 million. For the same fiscal quarter last year, Compaq’s commercial PC group reported a profit of $116 million. Compaq CEO Michael Capellas placed responsibility for the drop from first place in the US marketplace on Compaq’s competition and the impact the Taiwan earthquake had on the availability of critical components. Because Dell obtains the same kinds of components (e.g., memory chips) from Taiwan, it should be equally affected. The factors that have helped Dell grow have been a superior customer support program, good quality control, and a very early entry into built-to-order PCs purchased over the Internet. Dell has the largest percentage of its sales, the largest dollar volume of sales, and the strongest growth sales from direct Internet purchases. Dell also has a significant advantage over the competition thanks to its fine-tuned PC sales Web site Dell is the 175-pound gorilla of the PC industry—very agile and quick. In the last few months, we’ve seen Dell ink multibillion-dollar deals with IBM to obtain significant PC technologies for Dell's future PCs, something that makes Dell even more competitive with other PC players. It looks to many observers that IBM is in the process of closing its PC business and converting its PC operations into the role of a supplier to other industry players. With IBM PC business losing $1 billion last year and about $300 million this year, this move is understandable. In the past, Dell’s computers have been price leaders and very competitive with other industry leaders. Of the major players, only Gateway and Acer PCs consistently carried lower price tags. With the industry trend toward low-priced systems, Dell finally introduced a $999 computer this year. But the company is clearly making its money selling feature-rich Dimension desktop systems into the PC marketplace. Dell is strong in the workstation market, but it still lags behind other industry players like HP and Compaq. Given the success of low-cost white boxes and new brands like eMachines, Dell has done well directly selling more upscale PC systems. Still, any player in the PC market needs to be concerned about the trend in shrinking profit margins on new systems. Dell began a major push 2 years ago to establish itself in the small server and departmental workgroup marketplace, with great success. In 1998, Dell went from nowhere to third place in US server sales. Undoubtedly, when the 1999 server sales numbers come in, they will be even stronger. The other business initiative that Dell has going is in the storage area, with an expansion of its PowerVault line of enterprise storage devices and its emerging storage area networks (SANs) systems.

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