Compaq lead in PC market slips

Beleaguered Compaq Computer Corp. is in danger of losing its number one position in the market, despite surging PC demand from the U.S.

Consumer demand, heightened by low-cost PCs and interest in the Internet, drove personal computer shipments up more than 30 percent in the second quarter of 1999 compared to the year before. "The market has been stronger than we had expected," said Charles Smulders, an analyst at market researcher Dataquest Inc. "Certainly free PCs and the talk of free PCs generated attention in the market place, but there are other factors."

Smulders identified a recovering overseas market and interest in the Internet as the two main contributors to the strong growth. The California researcher and its rival International Data Corp. released their latest data on Monday, showing strong growth in PC shipments worldwide.

While Compaq continued to top the charts in the second quarter, it led rival Dell Computer Corp. by a statistical hair. In fact, a statistical error could easily flip-flop who remained on top. IDC showed Compaq with 16.6 percent of the market versus Dell's 16.3 percent, while Dataquest showed the two with 16.8 percent and 16.4, respectively.

While both Compaq and Dell saw shipments grow by more than 50 percent, Dell may have the momentum to put it in the top slot. "A year ago, Dell was also really close," said Smulders. "At that time, Compaq was reducing shipments into the channel to lower inventory. This year, it is more significant that they are closer."

While Compaq has kept a strong lead worldwide, both Dell and IBM Corp. had higher growth rates -- 50 percent and 47 percent, respectively -- helping to close the gap. Still, both IDC and Dataquest show Compaq holding the lead by about 1 million PCs.

Both analyst firms found PC shipments in the U.S. had topped 10 million for the quarter. IDC's estimates of the growth were the more optimistic of the two: 10.8 million computers sold totalling 35 percent growth. Dataquest estimated that 10 million PCs were shipped in the quarter -- 28.6 percent more than a year ago.

Much of the growth is due to repeat buyers, however, not new PC users. "A lot of the machines are going into second -- and third-PC homes," said Christine Arrington, an analyst at IDC in Framingham, Mass.