Healthy Q1 for PC makers say analysts

Despite a hard quarter, Compaq Computer Corp. managed to stay on top of the PC-maker pack in the first three months of 1999, according to reports released by both market research firms Dataquest/Gartner Group and International Data Corp.

"Many end users decided to go with other vendors," said Christine Arrington, analyst with market researcher International Data Corp. "Gateway gained a lot of momentum from such defections."

On Monday, both IDC and Dataquest/Gartner Group will release reports concluding that the PC industry had a strong first quarter. Worldwide sales grew 17.2 percent according to Dataquest and 19 percent according to IDC, while the companies pegged U.S. computer sales growth at 21 and 24 percent, respectively.

Of the top-five PC makers, Compaq had the most sluggish quarter. Compaq recently ousted long-time CEO Eckhard Pfeiffer, just days before becoming the only PC maker to announce a poor first quarter. While sales expanded 66 percent for the company, net profits shrank to $0.17 per share. "Compaq's difficulties appear to be more company-specific rather than industry-wide," said David Stremba, principal analyst for market researcher Dataquest/Gartner Group.

In the U.S, Compaq's PC shipments only grew 6.9 percent year-to-year, resulting in its market share decreasing to 15.7 percent from 17.8 percent in 1998, according to Dataquest. On the other hand, both direct vendors Dell and Gateway have grown their share of the market, leaping forward in the U.S. market with more than 50 percent and 40 percent growth, respectively.

That puts Dell a little more than a percentage point away from its arch rival, Compaq. Last year, Dell threatened Compaq's lead, almost surpassing the PC giant with its growing PC market share. This year, Dell was one of two companies to post an increase in sequential -- from the last quarter of 1998 to the first quarter of 1999 -- shipments. Normally, the first quarter is a slow one compared to the fourth-quarter Christmas season.

Hewlett-Packard also posted sequential sales growth. "Whether you are selling machines for $599 or $1,799, you have to manage your business better than your rivals," said Larry Sennett, spokesperson for HP. "One thing these numbers don't show is that we have passed Compaq to be No. 1 in retail in February and March."

HP came in fourth place in the U.S. market with around 8.5 percent of the market, according to the two market researchers. IBM (NYSE:IBM) came in fifth with an even 8 percent of the market.