Corpus Christi Caller Times Caller.com - Dell's sales last quarter leave Compaq in dust

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Tuesday, October 26, 1999

Dell's sales last quarter leave Compaq in dust
Rivalry between Texas firms will intensify as holiday season approaches, industry analysts say
By Cliff Edwards
Associated Press

   SAN JOSE, Calif. - Dell Computer Corp. easily surpassed rival Compaq Computer Corp. in U.S. personal computer sales last quarter - the first time Dell has held such a commanding lead over its Texas rival, two research firms said Monday.
   The holiday season is likely to test Dell's staying power as consumers cast their votes on whether they prefer to buy PCs over the Internet or from traditional stores, analysts said.
   "Compaq traditionally has had an edge in the fourth quarter because it's in retail," said John Brown, research director at International Data Corp. "What you see is a lot easier to buy than what you don't see. Dell usually doesn't get much of a kick because they're on the Internet, but consumers more and more are looking at both and weighing their options."
   Dell, based in Round Rock, sold nearly 2 million PCs from July through September, grabbing a 17.1 percent share of the U.S. market, up from a 13.4 percent in the same quarter a year ago, according to research firm Dataquest, a unit of Gartner Group.
   Compaq, based in Houston, sold 1.78 million computers, giving it a 15.3 percent share of the market. Compaq's share a year ago was 15 percent. IDC also said Dell finished ahead of Compaq in the July-September period.
   IDC had reported that Dell squeaked past Compaq in the second quarter by one-tenth of a percentage in terms of marketshare, though Dataquest said the third quarter was the first time Dell was on top. Both noted, though, that Compaq continued to hold the lead for global sales.
   "Going forward, it's going to be a neck-and-neck race. Unless somebody slips up, they're going to be going at each other's throats in Texas for months to come," Brown said. "That should be good for consumers . . . because value is probably going to be one of the single-most important factors in choosing."
   Dell's efficiency
   Dell is in a position of strength because its direct sales model reduces costs by being more efficient, said Charles Smulders, principal analyst for Dataquest's worldwide PC program.
   Dell's strategy of providing made-to-order computers is generating more than $30 million in sales a day.
   Other companies that keep large inventories on hand are forced to pass on some of those storage costs to consumers or suffer from weaker earnings, Smulders added.
   "Dell now is moving on to what we call the next generation of PC market economics . . . which focuses on driving down the cost per sale. One way to do that is to drive down internal costs." Smulders said.
   Other companies
   Gateway also is moving toward the next generation model, he said, a reason its sales jumped 40 percent in the quarter. That boosted the direct seller, with its more than 200 Gateway Country stores, to third place with a 9.3 percent U.S. market share, up from 8.2 percent a year earlier.
   Worldwide PC shipments rose 23.2 percent to 28.6 million units in the third quarter amid strong U.S. sales and rebounding demand in Asia, Dataquest said. IDC reported global PC sales jumped 25 percent to 27.9 million units.
   Not everyone is benefiting from the surge in sales. IBM Corp. saw its share of the U.S. market fall to 7.6 percent from 8.9 percent, while its worldwide share fell even more sharply.
   Analysts said the numbers reinforce problems IBM has had selling its money-losing Aptiva line. IBM, now in fifth place domestically and third globally, announced last week that beginning next year it would sell Aptivas only over the Internet.
   Compaq and Hewlett-Packard Co., which landed in fourth place, suffered because recent changes in corporate leadership now have executives at those firms focusing more on profitability than market share, Smulders said.

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